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FTSE 100, DAX and S&P 500 make headway as rebound gathers pace

While there is a lot of ground to make up, indices continue to benefit from the change in risk appetite in recent days.

​FTSE 100 aims for a return to recent highs

After Friday’s big rebound the index managed to shrug off some early weakness yesterday and make some more gains, putting in a very convincing low around 7200 for the time being.

Once again it is commodity prices that have come riding to the rescue, with oil’s gains yesterday helping to support index heavyweights like BP and Shell.

Further gains will put the index on course to test the previous highs of 7600, and then on to 7680/7700, where gains have stalled so far this year. Beyond this the medium-term level to watch would be 7900, last seen in early 2018.

The sellers have a tough job on their hands, and will need to reverse the bounce of the past two sessions, and drive the price back below 7200 if they are to open up the potential for more downside towards 6800.

DAX returns to the 50-day SMA

The DAX has returned to the 50-day simple moving average (SMA), although the elegant sequence of lower highs and lower lows remains in place for this index, with a more convincing break to the upside yet to establish itself.

European markets have rebounded from last week’s lows with the rest of the global indices complex, but their weakness since February, driven in no small part by their proximity to the Ukraine conflict, means they will be closely-watched for any renewed signs of weakness.

The index was able to poke its head above the 50-day SMA yesterday for a brief period, and while it edged back overnight another positive day seems to be in the offing. Further upside targets the highs of two weeks ago around 14,250, and then on to the next lower high at 14,500.

A drop back below 14,000 could suggest that fresh weakness has arrived, and would put the index back on course to target last week’s lows at 13,350.

S&P 500 futures point higher

While it only puts a small dent in the losses suffered since the end of March, the index has managed to put in a bounce since Thursday’s low.

This has seen it recover from below 3900 and retake 4000, with the hope that at least a short-term bounce might develop.

Big tech, which makes up such a slab of the S&P 500, was a major faller over the past six weeks, explaining much of the index’s poor performance. Recession concerns are still high, so it might be tough for this bounce to extend much beyond the next two or three weeks.

The next level to watch on the upside now becomes 4120, with a recovery above here opening the way to the post-Federal Reserve highs at 4300.

On the flipside, a reversal now brings 3900 and then 3860 into view, and then below this a fresh lower low is created.

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