Levels to watch: FTSE 100, DAX and Dow

Recent declines through European indices are likely to persist, despite short-term upside in early trade. Meanwhile, the Dow is looking likely to rebound from a key zone, yet will it be enough to shift away from the rampant selling of last week?

FTSE 100 rebound could be short-lived

The FTSE 100 managed to break below the critical 6841 support level last week, bringing about a heightened chance of a longer term and wider sell-off for the index.

While we saw a rebound on Friday, the subsequent fall through 6740 on Friday evening points towards a resumption of that bearish trend. With that in mind, this current rebound is likely to fall short of Friday’s peak of 6869. As such, this rally is likely to be short-term, with gains seen as a selling opportunity as long as we remain below 6869.

DAX sell-off likely to persist

The DAX is back in the red as we start off a new week, with investors and traders alike continuing to take a more risk-averse approach.

The completion of a head and shoulders (H&S) formation on the weekly timeframe did help provide a bearish outlook, with the recent losses on the hourly chart providing evidence of that H&S fallout. While we are seeing a little buying in recent hours, we are likely to see the sellers come back in once more before long. As such, watch for a bearish picture to dominate as long as price remains below 10,949.

Dow tumbles into crucial support zone

The Dow Jones has been falling sharply over the past week, bringing us back into a crucial support zone between the October low of 24,120 and November low of 24,243. A break below that area would point towards a possible wider period of downside coming into play. With the index beginning to regain ground off the back of a sharp deterioration on Friday, there is a good chance of some upside for the time being.

However, the key signal will come with a break below 24,120 or above 25,095.

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