Levels to watch: FTSE, DAX and Dow

Today is the calm after the storm. Indices saw losses increase dramatically yesterday, and while the US managed to finish in better form (particularly the Russell 2000 small-cap index), the outlook for Europe doesn’t look as if it has improved.

London city
Source: Bloomberg

Caution still prevails, with some Treasury-buying still going on, representing the ongoing wariness among investors. Yet again it is the US that offers the greatest comfort, having finished off the lows. Indices have eked out small gains so far today, and while this might be the beginning of a steady climb higher the general mood still doesn’t look conducive to a significant rally.

Given the size of the falls it will be a more difficult task to establish clear lines of potential support and resistance, and it may be several sessions before clear zones establish themselves.

50-H MA resistance for FTSE

The 6150 level marked the trough yesterday, but it seems that gains above 6250 are proving too much so far for the FTSE 100 this morning. Below 6270 the target remains 6165 and then 6120, while a rally will likely target 6330 and 6380.

For the time being the 50-hour moving average is going to be a big hurdle, but a break above the 200-hour MA around 6410 would signal that momentum has changed direction.

DAX could target 8800

The 8860 level is a vital area to watch. Below this area shorts will look to 8475 and then 8380, while longs would hope for gains above here towards 8960 and then 9080.

The 100-hour MA has marked the limit of any gains in recent weeks for the DAX and indeed the current price movement is a textbook downtrend, moving smoothly below the major moving averages. A bounce from intraday oversold levels is perhaps an indication that the index is gearing up for another attempt to break through the 100-hour MA around 8800.

Bulls look to 16,195 for Dow

The Dow Jones clearly didn’t enjoy dropping below 16,000 and buyers stepped in firmly to defend this line. A recovery of 16,195 would mark a big step forward for the bulls, with gains above here moving in the direction of 16,390 and then 16,530. Below traders will be looking for 15,765 and then 15,670.

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