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Levels to watch: FTSE 100, DAX and Dow

Indices have declined once more, yet with the FTSE 100 and Dow hitting important support levels, we need a bounce immediately or else things could start to get ugly again.

IG Analyst

Publication date : 2018-10-23T09:31:08+0100

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FTSE 100 pulls back into Fibonacci support

The FTSE 100 sold off overnight, with the price dropping into the 76.4% retracement of the recent recovery. There is a fear that this could be the beginning of another leg lower, yet it is worth watching to see the response to this Fibonacci support level to dictate the tone.

A break below 6967 and 6922 would point towards further downside over the short term. However, if we do respect this level, it could be the beginning of a new higher low for the FTSE 100.

FTSE 100 chart

FTSE 100 chart

FTSE 100 chart

DAX drops to 22-month low

The DAX has managed to do what the FTSE 100 hasn’t, with the index dropping under the low set earlier in the month. That not only sets a new 22-month low for the index, but also points towards the completion of a head and shoulders formation on the wider daily and weekly charts.

Of course, given that this is just around the inception of that pattern, there is a chance it may not fully take hold. However, given that break, there is also a strong chance we could begin another substantial downward spiral.

DAX chart

DAX chart

DAX chart

Dow drops into trendline support

The Dow Jones has managed to fall below all Fibonacci support levels, with the index eventually reaching an ascending trendline. We need to see this market hold up from here or else we are likely to be in for another strong move lower before long.

As such, watch for a potential bounce at this trendline, with the index needing to remain above 24,896 to provide a signal that we could start building something more bullish.

Dow Jones chart

Dow Jones chart

Dow Jones chart

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