Levels to watch: FTSE, DAX and Dow

Ahead of a potentially decisive day for global markets, indices in Europe and the UK are slightly lower. Caution in advance of the FOMC meeting is partially to blame, but we have seen two days of good gains so a short time of consolidation is not unexpected.

Source: Bloomberg

The presence of Federal Open Market Committee minutes on today’s agenda was always going to lead to a degree of caution. However the broader atmosphere, especially in continental European markets, is still positive. The DAX broke a descending trendline yesterday while the FTSE 100 pushed above 6700 for the first time since September.

Beyond the Fed minutes, options expiry on Friday and then Thanksgiving in the US next week does provide a more bullish backdrop for markets, even as US indices continue to look indecisive when compared to their European counterparts.

FTSE supported by 50-hour MA

Having broken through the 200-day moving average yesterday, the FTSE 100 now finds itself with the task of consolidating the move above this key indicator. The index moved into overbought levels on the daily relative strength index for the first time since the early days of September, which may give further weight to the idea that a pullback is on its way, even if it is a shallow one.

A close below the 200-day points us towards support at 6650 and then 6600 on the daily chart, while a positive finish today targets 6770.

The hourly chart is showing another pullback to the 50-hour MA, and while this is providing support for now, a more likely event is a continued decline towards 6660 and the 100-hour MA. This has been strong support in recent days, and with the intraday RSI now firmly out of overbought levels a fresh move higher could materialise from here.

DAX could test 200-DMA

The DAX is stalled below the 200-DMA, although with the daily RSI not overbought we still have room to test the former indicator. A close above 9510 would mean that the index is heading towards 9600 and then 9680, while a drop lower could possibly find support at 9390 and then the descending trendline from the September high at 9280.

The hourly chart continues to retreat from overbought levels, with first support possible at 9380 and then around the 200-hour MA at 9315.

Dow could head to 17,600

Yesterday’s spike above 17,700 has been defeated for now, but it is not wise to call a top just yet. If the decline accelerates then the index is still headed towards support first at 17,600 and then 17,545. Previously mentioned circumstances still apply, namely that the index is still overbought and also sits a long way from the 50- and 200-day moving averages.

A continuation of the morning drift lower would see the index target the 200-hour MA at 17,620, while an ongoing move would hit the Monday low around 17,550.

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