Levels to watch: FTSE, DAX and Dow

The new month and quarter has got off to a mixed start, with some choppy moves overnight, but indices are already attempting to put their best foot forward.

US trader
Source: Bloomberg

FTSE looks to bounce back

An abysmal performance yesterday has been nullified somewhat by the Chinese PMI figures overnight that have steadied the mining sector. However, the FTSE 100 still finds itself trapped well below recent all-time highs. So far, the lows of early March around 6700 have held, which gives encouragement to the bulls – a dip through here on the overnight session was firmly bought. However, the relative strength index (RSI) and stochastics are still trending lower, so buying enthusiasm should be tempered until at least one of these turns firmly higher.

The overnight dip probed the 100- and 200-day simple moving average (SMA) of 6722 and 6691 respectively, so these areas should still be regarded as a line in the sand. A move back above the 50-day SMA at 6875 would signal the latest dip has come to an end.

On the four-hour chart the price remains firmly below the 20-period (6840) and 50-period exponential moving average (EMA) 6888. The small bounce this morning is potentially just a temporary upward move in the longer downtrend from 7000+. Both these moving averages need to be broken to change the outlook in this time frame.

DAX still being propped up by buyers

Although unable to hold 12,000 yesterday, the DAX is still being propped up by eager buyers keen not to see the index slip much below 11,850 for any sustained period of time. As we saw last week, the dip below the 20-day SMA, 11,856, was another buying signal. This consolidation on the German market has gone on longer than many expected, but quarter-end was always likely to lead to more erratic market movements.

A close back above 12,000 restores the momentum to the bulls, with the all-time high still the target on the upside. Given that 11,800 has been such a significant support in recent weeks, a close below here would signal that a more serious dip is in the offing, with a possible target of the 50-day SMA at 11,310.

Buyers to return to Dow Jones

A drop in the Dow Jones, taking it below 17,700, was furiously bought in the overnight session, with US futures now firmly off their lows. The 100-day SMA, 17,790, is providing some short-term resistance, but a close above here would indicate buyers have returned. An immediate target is 18,000, followed on by the highs of last week at 18,200. A failure to hold 17,700 would signal a possible move down towards the 200-day SMA at 17,365.

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