Levels to watch: FTSE, DAX and Dow

Overnight gains are swiftly being eroded as the Friday and Monday sell-offs look set to resume.

Data
Source: Bloomberg

FTSE looks set for another leg lower

The FTSE 100 managed to break below the 6809-6813 support zone yesterday and while we have seen a sharp rally since, there is a good chance we are set for another leg lower to put into place a bearish short-term trend. 

On this occasion, it seems the 50% retracement could make the high of the day, where the market is looking towards yesterday’s lows of 6800 as the next major support level. We are currently better than evens for a move back to 6800, as opposed to a break above 6869.

However, should we reach 6800, it would likely tumble further than that. As an overall view, the FTSE looks like it is turning into a bearish short-term trend and as such, a bearish view is in play. This would be negated with an hourly close above 6920

 

FTSE 100 chart

DAX reverses overnight gains

The DAX rallied strongly overnight, with the index approaching the notable 10,483 level. Whether this level is a notable enough swing high or not remains arguable. However, the ability to remain below this level is a bearish sign. 

With the market turning lower amid a deteriorating MACD histogram and stochastic cross, there are signs that this could mark the latest peak for another leg lower. As such, a bearish view is in play, with an hourly close above 10,483 bringing a more neutral outlook. 

 

DAX chart

Dow bounces from key support level

The Dow sold off through trendline support yesterday, only to rally from the crucial 18,067 level. We have seen a move back above the 18,197 swing high, which could have bullish connotations compared with the European markets.

Thus, while we are looking at a likely weakening from here, we would need to see an hourly close below 18,067 to provide a bearish confirmation and overall head and shoulders pattern.

Dow Jones chart

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