Levels to watch: FTSE, DAX and Dow

Will the indices continue on their bearish path despite early signs of a recovery this morning?

Joshua Mahony
Market Analyst, London

2016-06-02T09:01:45+0100

Source: Bloomberg

FTSE bounces from Fibonacci retracement

Yesterday’s pullback in the FTSE 100 saw the index bottom out at the 76.4% Fibonacci retracement. While we have seen the sellers come back into play overnight, the failure to create a new low is a worry. The crucial thing here is that in the medium-term, we remain within an uptrend given that the pullback from this week has not taken out any swing lows on the way down.

However, in the short-term we are clearly trending lower and as such, we would need a break through 6205 to negate this bearish view. Thus a closed hourly candle above 6205 would look like we are going to see a recovery, with 6235 the next major resistance to the upside.

Alternately, a closed hourly candle below 6175 would look for a move back towards the 76.4% retracement and crucially the 6107 level.

ftse

DAX rallying from SMA support

The DAX is also managing to gain ground this morning, having found support on the 200-hour simple moving average. Clearly the sell-off overnight needed to create a new low, which did not happen and thus we are in limbo while we await either a break below 10,160 or above 10,220.

Given the recent sell-off, a move lower remains our preferred option until price breaks through 10,220. Key resistance levels are 10,220, 10,291 and 10,328. Notable support levels are 10,160 and 10,121.

dax

Dow turning higher from shallow pullback

The Dow Jones has also failed to create a new low overnight and is subsequently turning higher. The key for this market is to break through 17,809 to create a renewed bullish outlook.

Until that happens, there is a chance we are still going to see this market pull back somewhat. A closed hourly candle below this morning’s low of 17,740 would be a good signal that we are set to continue lower. Support levels of note below 17,740 are 17,659 and 17,637.

Alternately, a closed hourly candle above 17,809 would point towards a more bullish outlook with 17,827 and 17,845 the next resistance levels in view.