Technical analysis: key levels for FTSE, DAX and Dow

The shortened week in London sees traders returning to their screens with equity markets being noticeably higher than they were on Friday.

Data on screen
Source: Bloomberg

The magic 2000 level has been reached on the S&P 500, as optimism returns thanks to some supportive comments from Mario Draghi at Jackson Hole.

FTSE eyes 6810 level

This morning sees the FTSE 100 battling to hold above 6800, having breached this level in early trading.

However, it is toward 6810 that traders should look for real resistance; we saw a similar state of affairs to the end of July when the index proved able to move above 6800 but then had trouble staying there. Should 6810 be recovered then the next target becomes 6840 and then on to the 6880 level, which has proven so difficult to breach.

The daily relative strength index has yet to move into overbought territory, giving us the possibility of more upside. However, with the stochastic momentum index also sitting at extreme levels traders should be careful before going all in.

A look at the intraday chart shows that 6820 is holding back upward moves at present, but the 100-hour moving average has done well as an entry point for short-term positions. A falling intraday RSI signals that the upward momentum of last week has come to an end, but it seems likely that further gains will be the order of the day in due course.

DAX targets 9510

Germany’s index has yet to recover the 200-day moving average, but it has moved back above its long-term trendline, indicating that the severe correction in the DAX has run its course for now.

The daily RSI has been rising ever-higher since the major oversold reading in the first-half of August, and with the 9400 level retaken our focus should shift back towards 9600 if the 200-DMA is cleared.

As with the FTSE, the 100-hour MA has been a powerful support level over the past week, which should mean that any dip back in the direction of 9380 or 9400 should continue to find buyers, while the next target in the short-term is the 9510 area, which marked the peak yesterday.

Dow could find support at 50-DMA

The early August bounce from the 200-DMA here has carried the index all the way back to the 17,100 zone that marked the mid-summer highpoint.

Now we wait to see if the Dow Jones stumbles once again, or whether it can move onwards towards virgin territory. With the daily RSI just about overbought, there is the potential for some choppy trading here, but the 16,910-16,950 zone should provide support, with the 50-DMA standing just beyond this as well.

The hourly chart shows that Monday’s high around 17,120 is the target to beat, but with the intraday RSI still rising and holding above the 50 mark there is reason to suspect we will see fresh gains once the US wakes up.

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