Levels to watch: FTSE, DAX and Dow

Nobody ever said that markets were rational and this is why technical trading comes into its own. The massive bounce in indices Stateside last night was the best move witnessed this year, and yet nothing has essentially changed.

DAX sign
Source: Bloomberg

The Federal Open Market Committee minutes were indeed somewhat more dovish than the market had expected, yet it must be borne in mind that the meeting was held prior to the release of the slightly better-than-expected August Job Openings and Labor Turnover Survey report (a metric which is allegedly closely watched by Janet Yellen).

Central banks are at pains to convince market participants that exchange rates are not being targeted, yet the suggestion within the Federal Reserve minutes that a strong dollar coupled with global weakness were not conducive to a rebound in inflation. The recent rally in the greenback has clearly been against the grain, therefore speculation that a rate hike will occur in the first-half of next year has now been mooted, and the buy on the dips strategy is apparently still the way forward.

I would question the sustainability of the current rally as nothing has essentially changed. Germany looks like a miracle will be needed in order to avoid recession and the global slowdown has not been averted.

FTSE gains held back by 200-H MA

Mining stocks are leading the pack this morning, pushing the FTSE 100 back above the 6500 marker while present action is finding support around 6528. The 200-hour moving average is holding back any gains through 6560 in early trade. The 6580-6600 level is still the one to watch as a double bottom begins to form on the UK benchmark. A move through here could result in a measured move back up towards 6730-40 — a previous resistance/support level.

The 6500 mark is providing support in the intraday but a move back through here could see a retest of the recent lows at 6420.

DAX still bearish in short-term

The DAX saw price action bounce off the rising trendline support from the August 2011 lows, so the long-term uptrend remains intact unless we see a breach of the 8910 level. The rising relative strength index is also helping to support the move yet we remain in a short-term bearish channel from the September 19 highs.

Trapped below the 100-hour MA at 9160, only a convincing break of 9180-9200 could initiate a break to the upside. The target would then be the 200-H MA at 9277 — this is a metric that the DAX has challenged recently with no success. A move back through 9065 would take us back to 9000.

Dow eyes 17,150

The previous support and rising trendline at 16,674 held firm and the Dow Jones has charged through the 50- and 100-day moving average. The next level to target will be 17,100. Having broken free of the bearish channel from the Sep 19 highs, the question now is whether this will be like the last breakout, which failed to sustain.

The hourly chart is looking slightly oversold with a negative bias. Support comes from the 200-H MA at 16,930, then 16,900. A move through 17,150 would put the focus back on the all-time highs.

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