Levels to watch: FTSE, DAX and Dow

We are now only a day away from the European Central Bank meeting and signs of nervousness are clearly evident in European markets. Meanwhile the FTSE 100 is pushing higher for a third day, lifted by corporate news.

Trading data on screen
Source: Bloomberg

If the increasing number of leaks from ECB governing council members is anything to go by, quantitative easing is a certainty tomorrow. The main questions are ‘how much?’ and ‘will it be enough?’. We’ll find out in due course, but European indices have certainly stalled as nervousness sets in.

In London the FTSE 100 is still moving upwards, having enjoyed two consecutive days of gains already. The barrage of corporate results this morning has provided enough fuel for a decent rally, even if miners are giving back some of their gains from yesterday.

FTSE hits 200-DMA

London’s main index has looked very healthy of late, rallying sharply. The move higher has taken us back to the 200-DMA, for the first time since early December. A close above this point takes us on to the area around 6750. Beyond this the daily chart still points to next resistance around 6900.

Having broken through the 6570 area, this zone now becomes support, with rising trendline support coming from the January lows around 6510, in case the index drops back below the 50-DMA.

With the 100-hour crossing above the 200-hour yesterday, the upward move is intact, even if the ECB meeting tomorrow could potentially cause a change of direction.

DAX continues in tight range

Hesitancy is the best way to characterise the DAX at present, as it stumbles around the 10,300 level. However dips towards 10,200 continue to be bought by the ECB QE optimists, which suggests this tight range will persist until Mario Draghi unveils his thinking.

Although not overbought at present, the daily RSI has not moved much lower, so until we see a clear break back below 50 the bulls are still in control, with the caveat that the closeness to the overbought region still implies caution.

On the hourly chart the index is sagging, moving back below the 50-hour MA. Crucially the price is still a considerable distance from the rising trendline off the 6 January lows, with support here coming in around 10,000. A break below 10,200 would certainly open up this possibility.

Dow targets 17,710

US markets seem reluctant to make up their minds at present, and neither side seems able to establish control. Yesterday’s bounce off the 100-DMA adds fuel to the idea that the buyers may be gaining the upper hand, but until the daily relative strength index moves above 50 the situation is still too fluid.

Clearly the ECB decision tomorrow could be the decisive factor, although if earnings continue to improve the Dow Jones could still find itself moving higher.

Ultimately the first target is the 50-DMA at 17,710, and then on to the area above 18,000. On the downside, 17,200 is still support, with the 200-DMA lurking in the background around 17,060. 

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