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Technical analysis: key levels for FTSE, DAX and Dow

The expression ‘equity sell-off’ really needs to be tempered, and anyone who refers to the recent rout in the global indices would do well to take a trip back to the darkest days of 2008 to educate themselves.

Man studies computer screens
Source: Bloomberg

FTSE

After four consecutive days of losses the trendline support from the November 2012 lows has held nicely for the FTSE. While the pivotal 6650 level may well have been tested, the lack of a daily close below this metric ensures that for now we can at least expect to see a degree of consolidation around the 200-day moving average.

Given the strong start to early trade, with the rising relative strength index and price action above the 200-DMA, we may well see an additional move towards the previous resistance level around 6740 level which presently coincides with the 100-DMA.  Any close through this point puts us en route towards 6775.

Shorter term, the one-hour chart is indicating that perhaps the market is a little overbought, so we may see the market take a step back prior to any renewed attacks higher.

The 6713 level may provide some support in the intraday. Any prolonged pullbacks through 6700 level may reverse this upside bias.

DAX

We can probably expect to see an inane amount of witty football/finance juxtaposition in relation to the DAX today so I won’t even try.

Last Friday’s morning star candlestick with its lows at the 100-DMA as the previous support of 9640 has set us up for a decent up-move in early trade, confirmed by an increase in RSI momentum. 9690/70 is now the near-term support.

Next level to be challenged is the 9760/70 which would then see price action setting its sights on the 9800 psychological level and then the 50-DMA at 9838. A failure to break this level could mean that lower lows are in the offing.

Watch for any declines through the most recent lows at 9613, as this would negate the positive sentiment.

Dow

The Dow Jones is back at 17,000 and while the narrow ascending wedge indicates that a top may be near to hand, investors are, for now, giving the corporate earnings season the benefit of the doubt.

16,750 remains the key support level but, while above the 16,970 metric, we may see a move back to those all-time highs at 17,080 (particularly if earnings are surprisingly positive).

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