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There is no shortage of reasons to fret about the global economy. Greece, China, oil, all can be classified as concerns. And yet since October markets have seen one of their strongest bouncebacks in years.
As we head towards the final weeks of the year, the increase in volatility is to be expected. Investors who caught at least some of the bounce will be anxious to preserve their gains, while there is still no shortage of bears whose aim is to short every rally at every possible opportunity.
On today’s calendar, the big event is the European Central Bank’s TLTRO auction. Banks are being allowed to exchange their illiquid assets for cash from the ECB, boosting the amount available to lend and increasing the size of the ECB’s balance sheet. Demand may be weak however, as banks wait for possible QE in 2015, that even now is still on the agenda.
FTSE below 50-DMA
So far the FTSE 100 has been battling to hold above 6500, having found support yesterday around 6460-6470. The index has fallen almost 4% from its recent high, and finds itself below the 50-day moving average for the first time since early November.
The 6550 level is a clear first target on the upside, and then on to the 6640-6650 zone. A failure to hold above 6500 today would lead to a possible test of 6420 and then 6380.
On the hourly chart the index needs to muster the strength to push above the 50-hour at 6530 before moving on to challenge the 6565 level.
DAX could test 200-DMA
Interestingly the DAX now finds itself sitting on top of the descending line from the July highs, which it previously punched through in late November.
If it closes below this line once more the way is potentially open to a test of the 200-DMA at 9530, with possible support before this at 9630.
At present the index is struggling to clear the 50-hour MA, with 9850 also acting as resistance for the time being. A close above here takes us back towards 9900 and then the 200-hour MA at 9940.
Dow finds support near 17,380
The Dow is finally catching up with its moving averages, a process that had to happen at some point. Having been so overextended recently this pullback is only natural.
First support lies around 17,380 should the index break through the Wednesday lows, and then on to the 50-day at 17,275. Meanwhile, on the upside the first target to watch is 17,800 and then the December peak just below 18,000.