Technical analysis: key levels for FTSE, DAX and Dow

Still more losses have been seen on UK and European indices, with key support looming for both the FTSE 100 and the DAX.

A man looking at a chart
Source: Bloomberg

FTSE drops to 6700

Three days of declines have carried us back to 6700 on the FTSE 100, the big level that saw selling stop in the last part of June.

Beyond this lies the 200-day moving average, so a break of 6700 would not necessarily be the end of the world for the London index. However, it certainly looks as if the upward move has run out of steam.

The relative strength index now sits at levels not seen since mid-March when the FTSE had its previous bout of indecision. While not oversold yet, until this indicator turns higher it is hard to see how any rally can be sustained.

A drop through 6900 and then the 200-DMA would leave open a possible move towards 6500, with only a close above 6750 raising hope of more upside.

9640 next support for DAX

A fall through 9800 for the DAX means that 9640, the 100-DMA, is the next target for support, closely followed by 9600.

Although the picture here is not as dire as the FTSE, the drop back from 10,000 signals how limited the buying momentum has been.

Only a close back above the 50-DMA would signal the start of a more positive move, and even this would have to get beyond the June highs to suggest the start of a longer-term move.

Dow heading towards 20-DMA

The Dow Jones is heading back towards the 20-DMA, which was a very successful support level in June, while shortly beyond that is the rising trendline from the February lows. Even then the 50-DMA may step into the breach if the market falls further.

The close off the lows yesterday is a welcome sign, but with the RSI and other momentum indicators slipping there is still reason to be cautious.

Nonetheless, only a close below the 50-DMA would shift the view to a firmly bearish one – this market has fooled the naysayers too often in recent months.

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