Levels to watch: FTSE, DAX and Dow

The day dawns and markets are full of anticipation ahead of the European Central Bank decision at 12.45pm. Having waited so long, markets are brimming with expectation.

A chart
Source: Bloomberg

Today is expected to see the ECB begin its journey down a road trodden by the Federal Reserve, the Bank of Japan and the Bank of England – quantitative easing. Leaks yesterday suggested that the bank would buy €50 billion a month for at least a year. Given that indices are still holding on to most of their gains this would seem to be broadly in line with expectations.

ECB nerves capping FTSE gains

Yesterday’s FTSE price action saw the index punch through the 200-day moving average for the first time this year. It now sits just below the 6770 high from early December. Clearly ECB nerves will contain any moves before this afternoon, but a break above 6770 is the move the market requires to begin another attempt on the 6900 area.

On the downside we have the 50-DMA as support, followed up by the rising trendline off the December lows, which will enter the frame as support around 6500 itself.

DAX retreats from 10,300

The German index nosed its way above 10,300 last night again, but has fallen back today ahead of the ECB decision. However, the 10,200 area still brings out the buyers, even if by now they are somewhat late to the party.

Much hangs on what Mario Draghi says, but the hourly uptrend off the January lows still remains intact, while two successive touches of the 100-hour moving average have resulted in moves higher. With the hourly relative strength index dropping sharply lower again, however, pre-decision weakness is probably the order of the day.

Dow above 17,600

It looks as if US markets are in a mood to push higher, with the Dow Jones moving above 17,600 once again. The RSI and stochastic indicators are moving up along with the price, which suggests to me that, ECB events permitting, we may be seeing the start of a sustained move higher.

In that case we look towards a break of the 50-DMA at 17,710, followed by upside targets around 17,900 and then 18,100. As with the DAX, there is a rising hourly trend in place, although in this index’s case it began at the end of last week. Rising support could be found around 17,450, and also at the confluence of the 50- and 200-hour MAs.

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