Levels to watch: FTSE, DAX and Dow

The sense of pessimism in global indices is still very much the main theme as we approach the all-important European Central Bank press conference tomorrow, followed by employment numbers in the US on Friday.

A man looking at a chart
Source: Bloomberg

Geopolitical tensions, the burgeoning disinflation levels in the eurozone and the lack of appetite for free-falling commodities has given the market pause. So far this week, the buy on the dips strategy has not exactly borne fruit.

Manufacturing PMI data has been a mixed bag and seen additional pressure on the single currency, sending it below the $1.26 level. The pound has also seen selling, owing to the weaker-than-expected print. Meanwhile, the dollar builds up another head of steam, looking to finish its seventh consecutive week of gains.

FTSE clings to 6600

The FTSE is clinging like a limpet to the 6600 level but has ultimately breached the rising trendline support from the August 2011 lows.

The hourly chart shows that price action is trapped in a falling wedge pattern but bids are being found at today’s lows of 6583, thus with the positive divergence coming from the short-term relative strength index we may witness a return to the 6625 level (50-hour MA) and then 6640 (100-hour MA) – a break above the 100-hour MA could see a challenge on the 6670 level.

A decline through the lows takes us back to levels last seen on August 8 – 6530.

DAX downward bias remains

The 50-week moving average on the DAX, although tested this week, has lent some support and price action is now attempting to overcome the 50-day moving average at 9480-90. Remaining above the 9500 level seems like a difficult task for the time being so any additional selling through 9470 (50% retracement) could see the index make a return to the 9400 level.

The one-hour bearish channel has held firm with upside limited by the 100-hour MA at 9486 – a break back through 9522 targets 9560 but with short-term RSI on the turn, the bias is for the downtrend to remain intact.

Dow 200-hour MA capping upside

The Dow Jones has yet to relinquish the 17,000 level with any real conviction, and the 38.2% retracement from the August lows to the all-time highs at 16,944 is the level to watch for now. The falling 200-hour MA is capping the upside at 17,130-50, coinciding with the channel resistance from the 17,365 highs.

A move back through 17,000 targets 16,944 – while a fall through this level brings 16,902 back into the frame.

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