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Key index levels: technicals for FTSE, DAX and Dow

Markets have begun the week positively, after a reasonable finish to May for the US and Germany. The FTSE 100, however, still seems to be rangebound. 

For all indices, the big moments come later in the week. The June European Central Bank meeting has been invested with much importance, with markets broadly expecting major action from Mario Draghi. Non-farm payrolls follow on very quickly, so much of the volatility will be found on Thursday and Friday.

FTSE lifted by mining sector

On an hourly chart, the FTSE 100 seems stuck between a rock and a hard place. Friday’s worries about Chinese growth saw miners drag the index lower, but factory data over the weekend has given the sector a fresh lift, pushing the broader index higher as a result. However, we can see that the 6882-6885 area has been the stumbling block over the past three sessions, and there is no reason to suppose that today will be any different. As for the bottom end of the range, 6835-6840 has proved to be a reasonable line in the sand over the past week, and I expect this to hold for now.

On a daily chart, some support from around 6780 has formed, while the rising 50-day moving average should also stem the selling if a downward move does gather pace. Each failure to top 6900 raises the possibility of more volatility on the downside, as the upward move from mid-April runs out of steam.

Dax lacking upward strength

The German index has been much more promising for bulls than the FTSE 100, but here too upward progress has become more difficult. A series of quick moves carried it through 9800 and on to record highs, but 10,000 is still out of reach.

We did see a touch of 9990 during the early part of today’s session but since then we have fallen back below 9972, signalling that upward strength remains lacking. Any downside in the short term should be limited to 9900 however, and for the Dax, like the FTSE 100, rangebound trading seems to be the order of the day.

Dow’s move higher wilts

The Dow Jones has found support along the 100-hour moving average over the past week, which has allowed it to steadily build gains. But here too, we have seen the move higher wilt as May came to an end.

However, for the bears, the picture does not offer too much sustenance. Even a bout of selling would only take us back towards 16,400, with the general impression being there is still plenty of money on the sidelines waiting for another entry point.

16,740 remains the level to watch for the Dow, having marked the high point in recent weeks. Meanwhile, the 50-DMA is perhaps an immediate line of support around 16,500. Here again, as with the DAX and the FTSE 100, most traders have shifted towards ‘wait and see’ ahead of the ECB and non-farms.

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