Levels to watch: FTSE, DAX and Dow

Indices start to show signs of weakness ahead of a major event risk weekend, with the Doha meeting on Sunday. The DAX and Dow are both at major resistance levels and a pullback could be on the cards.

Trader reflected in data screens
Source: Bloomberg

FTSE caution continues
The FTSE rally has certainly hit the buffers over the past 24 hours, with price action largely flat ahead of this weekend’s crucial Doha meeting. The four-hour chart shows there is a clear inability to break through the 6376 level, pointing towards the risk of a retracement lower.

Looking at the stochastic, it has been coiling upwards and is now significantly overbought and turning lower. A stochastic trendline break would provide a strong signal of a pullback in the FTSE. Ultimately, we would need to see a closed hourly candle below 6344 to provide a bearish outlook, with 6335, 6324 and 6295 the next levels of support in view.

Alternately, watch 6353 as a near-term support level that could provide another bounce towards 6376. A closed hourly candle above 6376 would likely spark another leg higher for the index, with 6447 the next major resistance level. 

DAX tumbles from major resistance
The DAX is really coming under pressure this morning, after hitting a massive resistance zone of 10,096-10,121 (March 2016 and December 2015 highs). Coming off the back of such a strong rally, there is a good chance we could see the DAX come off heavily, with the bearish signal coming with an hourly close below 10,012.

Should that occur, the Fibonacci retracements come into view, with 9990 and 9918 the first support levels in sight. Given the existence of this major resistance level at 10,121, we would need to see an hourly close above this level to bring about a renewed bullish outlook, with 10,166 the next resistance level to the upside.

Dow upside remains, for now
The Dow Jones is clearly still creating higher highs and lows, but with a descending triangle pattern in play, a break lower could be around the corner. The 17,913 support level is clearly defined and thus a closed hourly candle below this level would likely spark further losses.

However, it would be a closed hourly candle below 17,862 that would be of most importance. Should that occur, a sharp pullback towards 17,845 and even 17,792 could be on the cards. Conversely, given that we remain within an uptrend, there is a chance of another leg higher.

However, we would need to see an hourly close above 17,978 to regain confidence of this trend continuing. 17,978 represents a major high (November 2015) and thus much like the DAX, there is a good chance we will see profits taken at such a major level ahead of the big meeting in Doha. 

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