Levels to watch: FTSE, DAX and Dow

The weekend saw little in the way of significant news, lacking even a fresh poll on the Scottish referendum to provide excitement. With a Federal Reserve meeting and the independence decision on the events list this week, it is likely that we will see volatility build as the week goes on.

US Federal Reserve
Source: Bloomberg

Last week was one of broad-based weakness on equity markets, and saw the Dow Jones fall below 17,000, while the S&P 500 was not able to recover the 2000 level. As we start the week the FTSE 100 is fighting hard to hold 6800, while all eyes turn to the Federal Open Market Committee meeting on Wednesday. Policy is set to remain unchanged, but as has been the case for months now it is the wording of the statement that will be most important.

FTSE battling to hold 6800

After floundering around 6780 at the beginning of the session we have seen the index move back above 6800. The 6780 level has proven to be key support in recent days, providing a buying opportunity for short-term traders, while those with a longer-term view take comfort in the strength of the index.

A close above 6800 keeps the upside target of 6830 in focus, and then on to 6880 once again. Meanwhile, 6780 must hold if the market is to avoid testing the rising trendline support around 6760 and the 50-day moving average just below this at 6754.

Since Friday the 50-hour MA around 6800 has capped progress and is doing so again this morning, leaving the market in a tight 20 point range of 6780-6800.

100-DMA hindering DAX

Having started the day just below 9600, the DAX is finding its progress hampered by the 100-DMA at 9660. The index requires a close through here to challenge the key 9800 level, which has marked the highpoint of progress in September so far. A continuing decline in the daily relative strength index and a potential bearish crossover in moving average convergence divergence, seem to indicate the market will see further downside in the short term, testing the 200-DMA around 9560.

On the hourly chart the index has opened below the 200-hour MA for the first time since the early days of August. As with the FTSE, the DAX has run into resistance around 50-hour MA at 9660. Any drop below here would leave the index heading towards support at 9620 and then 9550.

Dow supported by 16,890

A drop through 17,000 does not necessarily signal the potential of another correction, but we are seeing a decline in the daily RSI and MACD that suggests the index will test the 50-DMA around 16,910 and then on to 16,820 as potential support.

The first task in any upward move will be to close back above 17,000 which would then target 17,060 and on to the all-time high just above 17,150.

Short-term support on the hourly chart should be found around 16,890, and then 16,760.

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