Levels to watch: FTSE, DAX and Dow

Indices turn lower once more following yesterday’s bounce. Will this spark the next leg lower for indices?

Joshua Mahony JMahony_IG
Market Analyst, London

2017-03-23T08:57:41+0000

Source: Bloomberg

FTSE falling back to key support zone

The FTSE 100 is moving sharply lower once more this morning, with price falling back into trendline and simple moving average (SMA) support (200 on four-hour). Below that we have the 76.4% Fibonacci support, thus forming a zone of support between 7306 and 7312. Should we break and post an hourly close below the 7306, it would go some way to showing we are set for further losses.

However, be aware of the wider trend of higher highs and higher lows. Until we break below 7262, the uptrend remains intact and thus it is worth being open minded that we could see a bounce. For that to occur, we would be looking for an hourly close above 7343.

That said, this chart is basically a case of taking a view over Trump’s healthcare bill. For those who expect it to pass, longs at 7306 seem sensible, on the basis the Trump trade will be back on. Otherwise, failure at congress could see the index finally break out of this trend, with a slide below 7262.

FTSE 100 price chart

DAX turning lower

The DAX is similarly weakening this morning, off the back of a rally overnight. An hourly close below 11,850 would provide confidence that we are going to see this index trend lower once more.

With the stochastic turning lower from channel resistance, coupled with the fact the important 11,909 level has been taken out, it does look likely that we will see the sellers continue to dominate once more today. An hourly close above 11,970 would go some way to negating that view.

DAX price chart

Dow respects SMA resistance

The Dow Jones has faltered at the 200-period (four-hour) SMA overnight, and there’s a good chance we are now seeing the resumption of the weakness instigated on Tuesday. Certainly an hourly close below 20,580 would provide greater confidence that we are set for another leg lower, yet unless we break through 20,693, it looks the likeliest event.

As previously mentioned, much of the future for this market will be associated with the outcome of the healthcare bill discussions in Washington.