Levels to watch: FTSE, DAX and Dow

Indices continue to retrace, yet for now the signs are that this is likely to be a short-term phenomenon.

The London stock exchange logo on a wall
Source: Bloomberg

FTSE weakness looks temporary

Yesterday saw the FTSE continue to grind lower, with Friday’s support level of 6388 providing new resistance to cap yesterday’s move lower. This looks a lot like a short-term phenomenon for now and I would need to see the price break back below 6300 to gain confidence that we are actually seeing a selloff of substance.

For today, I would expect a resumption of the bullish trend should the price break back above 6388 in the near future without breaking below 6350 first. However, further short-term downside is certainly a possibility, and given the fact that all previous retracements have seen long lower shadows for the candle that ultimately marks the bottom, I would like to see this happen again.

Overall I am bullish unless the price moves below 6300, with 6344 support and 6388/6455 resistance providing my levels to watch in the short term.

DAX upside eases off as momentum falls

The DAX is certainly waning somewhat in the energy of its upside with price action becoming increasingly sideways. This has been accompanied by fading momentum, which is creating new lows alongside lower highs, to create a bearish divergence. However, despite this, we have not yet seen a signal that the price is about to reverse lower, with the 10,068 support level providing key support for today.

The 20-period SMA is another support indicator which is worth watching as this has capped recent retracements lower. For now, I expect the price to hold up above these two indicators, yet a move below 10,068 could lead to further downside towards the 10,018 mark initially. I would need to see a break below 9900 for greater confidence of a strong selloff and instead prefer to treat this as a short-term breather within a bull run.

Dow grinds slowly higher

The Dow Jones is the one index that continues to move higher, creating marginal gains overnight. This does also look like a breather being taken while we ascertain whether a pullback is in order or whether the bull run is set to continue. I tend to look for a trend to continuel, and thus I do expect further upside for the Dow. A pullback would thus be seen as temporary, with 17,037 and 16,937 looking like notable support levels to watch.

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