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FTSE 100, DAX and Dow regain ground, as the US leads the way

FTSE 100, DAX and Dow put an end to last week’s sharp losses, with US markets outperforming on the expectation of FOMC stimulus.

FTSE 100 forming a base amid stimulus hope

The FTSE 100 appears to be in a consolidation phase, in what could turn out to be a bottom given the break through trendline resistance. A break through the 6773 resistance level would provide greater confidence of further upside, with a decline below 6611 signalling a continuation of this current consolidation zone.

Hope of a worldwide stimulus plan is helping drive markets higher for the time being. That impact is lessened in the UK compared with the US, yet we have certainly seen the previous declines grind to a halt.

DAX declines turn to consolidation

The DAX has similarly slowed its decline, with the index largely consolidating since Friday's lows. We have continued to create lower lows, with the subsequent rally bringing about a move into the 76.4% Fibonacci retracement at 12,077.

We would need to see a rise through the 12,217 level to gain confidence of a more bullish period, with investors clearly skeptical of exactly how much stimulus the European Central Bank (ECB) can really introduce given the current rock-bottom rates and ongoing quantitative easing programme.

Dow Jones breaks through trendline resistance to surge higher

The Dow Jones managed to post a huge 5% gain yesterday, with the price following up a trendline break with a sharp move higher. Markets are now expecting 1% of rate Federal Reserve (Fed) cuts this year, and this is likely driving much of the differential we are seeing between US and European markets.

The pullback we have seen overnight looks like a precursor to further upside, with a rise through 26,766 providing a new bullish signal. To the downside, we would need to see a break below the 25,858 level to bring about a more bearish picture once more.

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