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FTSE 100, DAX and Dow expected to decline despite short-term rebound

FTSE 100, DAX and Dow gain ground overnight, yet recent declines point towards market tops coming in play once again.

FTSE 100 rebounds into 76.4% resistance after sell-off

The FTSE 100 saw sharp declines throughout yesterday's session, with the index ultimately dropping back into the critical 5338 support level. This move looks to build on the breakdown from higher lows seen last Friday.

With the price having turned down from the 76.4% Fibonacci resistance level at 5712, a break below the 5338 low would have pointed towards a reversal coming into play as the price seeks to reverse the gains seen in the final days of March. Nevertheless, the overnight rally has taken us into a shorter-term Fibonacci resistance level, with the 76.4% level at 5475 now worth watching. As long as the price remains below the 5517 swing high, this rebound could be capped for another bearish move back towards the 5340 support level. Thus the short-term outlooks will be determined by whether we break below 5340 or above 5517. In either case, there is a good chance the index is priming itself for another major move lower.

DAX rises after brief double top completion

The DAX managed to break below the double top neckline of 9373 yesterday, with the index looking likely to have formed a top. Given that this looks like a market reversal playing out, there is a chance we could see short-term upside as markets realign back into a more bearish view.

Once again we are seeing 76.4% Fibonacci support (9549), with the index needing a break through 9620 to bring about a potential extension to this short-term rebound. Until that happens, there is a good chance we break lower from here, with the stochastic oscillator moving into oversold territory.

Dow Jones double top points towards further downside

The Dow Jones managed to complete a double top formation yesterday, with the index breaking below the critical 21,145 support level. This points towards a likely end to the recent recovery, with further downside likely before long.

Whether that will come immediately remains to be seen, with the price rallying overnight. That move has taken the index into the 61.8% Fibonacci retracement level. A break through the 21,490 resistance level would signal a likely extended rebound coming into play. Conversely, this deep retracement could provide us with a good shorting opportunity if we start to reverse lower from this 61.8%-76.4% Fibonacci zone. For those seeking out a technical sell signal, watch for a break back below the 80 level in the stochastic, with the indicator likely to rise into overbought territory today.


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