Indices turn higher to retrace recent losses
The indices sell-off has taken a breather, with FTSE 100, DAX and Dow all gaining ground. However, the Dow has led the losses, with a head and shoulders pattern pointing towards further downside to come.
FTSE 100 starts to rebound after sharp declines
The FTSE 100 sold off sharply over recent trading days, with the index reaching the lowest level in two weeks. However, we are now in retracement mode, with the price rising to take back some of that prior move.
This comes from a crucial support level, with the 7145 area providing a hurdle which if overcome would have completed a wider bearish head and shoulders formation. That is not the case for now, yet we could come back for another try before long. Until then, it looks like we could see a more bullish phase take hold towards the end of the week as we retrace some of that sell-off from 7319. However, only with a break above that 7139 swing high would the bearish trend be negated.
DAX regaining ground from key support
The DAX is also recovering some of the lost ground following a sell-off into the key 11,814 swing low.
A break below there would provide us with a wider bearish picture. However, instead we look likely to post a rebound as we retrace the sell-off from 12,123. A rally through that level would bring a wider bullish picture. Until then, this period of upside is viewed as a retracement before we turn back towards that crucial 11,814 level once more.
Dow rising after head and shoulders completion
The Dow Jones is ahead of the game when it comes to losing ground, with the index having broken below the key 25,216 level to complete a head and shoulders pattern. That signals a likely wider bearish picture coming into play before long.
For now, we are seeing the index recover some of that long ground, yet unless we see a rise above 25,716, further downside is expected before long.
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