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Levels to watch: FTSE, DAX and Dow

Oil prices have started to make their mark on equity indices and the fall looks to be gathering legs as we hit a five-year low. 

Data on a screen
Source: Bloomberg

The news that Greece will be holding elections this month has also upset the apple cart and the risk-off remains — at least until the US opens. 

FTSE could reach 6505

Being so heavily weighted towards basic resources, the drop in oil prices was always going to be quite the hurdle for the FTSE 100. The fact that we were unable to clamber above the 6770 level was also a problem.

The index has now relinquished the 200-day moving average and the 100-DMA in quick succession, and while below the 6600 level there is a potential a move towards the 50-DMA at 6542 in view. The 6640 level should now provide a degree of resistance.

Relative strength index on the daily chart appears to still have the momentum to go lower, but the market seems to be stabilising around the 6575 level (the early November lows). Given that we have been watching the index trade in a 130-point range since 20 November means that now we have fallen through the bottom of the rectangle, a measured move could be on the cards. This would imply that the 6505 level is a target overall.

DAX key support is 9840

The 10,000 level is last week’s news and the DAX is falling deeper into the red but remains above the rising trendline support from the October lows.

German exports fell 0.5% month-on-month in October, down 1.8% in the latest three months which all adds up the steepest decline since January 2013 and is clearly doing little to aid sentiment.

Resistance can now be found at 9970 and the confluence of the hourly MAs with the price action trading below, tends to spell a sideways to downside bias.

The 9840 level is the key support now. Should this level fail then we could see a decline through the 9800 level towards the 9785 and the 100-period MA on the four-hour chart. This metric has provided decent support in the past and coincides nicely with the trendline support from the October lows.

Dow RSI cause for concern

The fact that price action has hit the top band of the bullish channel on the daily chart has led to some profit taking. Clearly the decline in McDonald’s stock price yesterday has also been to the detriment of the Dow Jones. The bearish divergence on the weekly RSI remains a concern.

The 17,800 level appears to be holding for now but any sign of a lunge deeper would mean that next support is the 17,775, then 17,716 level (a previous area of resistance).

The rising RSI on the hourly chart indicates that we may see the index push back towards the 17,860 level (200-H MA). For now, resistance lies at 17,900.

 

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