Levels to watch: FTSE, DAX and Dow

Hopes of a deal in Greece and more stabilisation in Chinese equities have allowed stock markets to rally, with European stocks looking particularly strong. 

A chart
Source: Bloomberg

FTSE eyes 6741

Having taken out Monday’s highs, the index now looks a lot healthier. It still has to close the gap between 28 and 29 June, and this would combine nicely with a move back above the 200-day SMA (6741). This would then set the index up nicely for a test of the late-June highs around 6875. With Greece still to be officially fixed we may see some hesitancy today, combined with the usual end-of-week skittishness, so a pullback back below 6600 cannot be ruled out, perhaps to a rising hourly trendline around 6590. With the dollar weakening and key macro fears receding, the current period looks more auspicious for equities than it has done for a while.

DAX buyers in control

Gains this morning have stalled below 11,300, but this is understandable given investor reluctance to not believe a Greek deal until they actually see it. Daily stochastics have turned bullish for the first time in several weeks, so if the index can move above the 50-day SMA at 11,352 we may see further bullish momentum develop. The emphatic bounce off the 200-day SMA for the DAX yesterday is the clearest sign that buyers are back in charge.

With hourly stochastics still overbought the wisest course would be to wait for a move lower rather than risk watching the market move against you in the short term. Greece looks to be fixed, but there is always the possibility that the talks may be derailed, so it may best to sit and await developments. 

Dow meets resistance at 17,730

Despite an overnight move higher, Dow Jones futures have stalled at 17,730, the same area as yesterday. For bulls this is a problem, and is not the only one to cause concern, since Tuesday’s highs at 17,800 will also prove to be problematic. Yesterday’s price action stalled at the 200-day SMA so this will be a key one to watch. A clearance of this indicator would then allow the market to head towards 18,000. However, assuming further progress in Greece and a quieter period in China, resurgent bullishness should drag us higher.    

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