Levels to watch: FTSE, DAX and Dow

Yesterday’s trade has reversed itself, with eurozone indices actually going down for a change while bargain hunters start picking over the FTSE 100.

A candlestick chart
Source: Bloomberg

FTSE above 50-DMA

Two days of bouncing around support at 6700 and near the 200-day moving average have given the FTSE enough energy to make a push at rallying through the 50-DMA this morning. A close back above here shifts the picture back to a more neutral tone after days of bearishness, and with the daily relative strength index showing its first real bounce in a number of days a move back to 6800 may be on the cards.

On the hourly chart the index has pushed through the 50-DMA for the first time this week, having formed a clear base at 6700 that should be considered support for the time being.

Admittedly, the bounce may struggle to maintain momentum given the lack of economic data, but sellers might now want to hold their fire until the week’s lows at 6700 are cleared.

DAX retreats from record highs

Red numbers on DAX screens are a rare occurrence these days, but they are in evidence this morning as the index trims gains from yet another record high yesterday.

Yesterday’s bounce off the rising hourly trendline confirms that it is still unwise to try and call tops here. We are sharply overbought on the daily timeframe, but this has not proven an impediment to gains in recent sessions. 

Ideally a pullback to the 20-DMA would provide an entry point, but in the absence of this it is worth watching the four-hour chart and stochastics in this timeframe, with a move back towards 11,600 causing the momentum indicators to turn lower for a short period before the all-but inevitable move higher that will likely occur next week.

Dow eyes close above 100-DMA

US indices have stabilised off the lows overnight, as the Dow Jones hit the rising trendline off the October lows that I flagged up yesterday. Daily RSI and stochastic indicators have yet to show a significant turnaround, but if the index can close above the 100-DMA today we may have seen the end of this brief mini-correction.

A close below the October trendline at 17,600 would however signal the start of a new move lower, with a target of the 200-DMA at 17,300. 

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