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Levels to watch: FTSE, DAX and Dow

The rally that won’t stop didn’t stop this morning, with the FTSE 100 and DAX both reaching fresh four-week highs, while US indices continue to break fresh ground.

A chart
Source: Bloomberg

Non-farm payrolls of course could prove to be a decisive point in halting the parabolic move we’ve seen, and in any case the prudent course at this point is not to chase the market but allow some degree of calm to return.

Buyers push FTSE to 6600

Buyers were out in force this morning, taking the index back to 6600, having surged back above the 16 October trendline once more during the course of yesterday’s session. The European Central Bank meeting was perceived as broadly dovish, giving yet another boost to indices.

The index has clambered through the 50-day moving average this morning, but still needs a close above it for this development to be perceived as definitively bullish. A close above 6600 would put us back on course for the 200-DMA at 6690, and with the daily relative strength index still not overbought there is room for this to be achieved.

The hourly RSI is duplicating last Friday’s overbought condition, so this suggests that immediate further upside is limited, with the new week perhaps opening with a degree of weakness. However, the 200-hour MA has so far done well to provide both support and entry points, and a move back towards 6515 would probably bring out the buyers once again. Near-term resistance is likely around 6630 and then 6660.

DAX upside momentum remains strong

Despite attempts over the past couple of days to break above the 100-DMA, the DAX has yet to accomplish a daily close through the metric. Upside momentum appears to be strong nevertheless and neither the daily nor weekly charts are indicating any overextension.

Any move through yesterday’s highs at 9468 will put the index on a mission to tackle the 200-DMA at 9505, where one could expect to see some heavy resistance in the near term.

The one-hour chart remains in an uptrend, and while for now it seems that the 9400-9450 levels are a little too much, having established a measured move following the break of the range between 9235 and 9345.

A pull back towards the 9340 level (trendline support and 50-hour MA) could provide a more appealing entry point. The 100-hour MA at 9300 resides below this, but any declines to here would not upset the overall short-term momentum.

Key support lies at the 200-hour MA, just above the 9200 level.

Dow RSI overbought

Another day, another record high for the Dow Jones. The moves since the lows around 15,800 have practically created a straight line on the chart, and the extreme slope of the trend makes it difficult to chase the upside. The daily RSI is overbought, while the weekly RSI is indicating some negative divergence but has not entered the overbought zone for now.

The futures market has touched 17,600 in early trade so a good non-farm payroll number could well be the catalyst to drive through this area. Support lies at 17,500-15, and the 100-hour MA should contain any significant downward moves. Any breaks below it target 17,350.

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