Levels to watch: FTSE, DAX and Dow

After yesterday’s selloff, buyers are creeping in to defend key levels – but enthusiasm appears to be lacking. 

Trader watching data
Source: Bloomberg

FTSE could challenge May highs
The line to watch for the FTSE is now 6920, the support level having held since 29 April. A continued close above here hands the short-term advantage to the buyers, with a target of 7000 and then the high of 4/5 May at 7060. A continuation of this move would once again target the top of the range, at 7100/7120.

Meanwhile, a failure to hold on to 6920 would suggest a dip back to the rising trendline off the December lows, back to around 6870. Given the choppy nature of markets at present we could continue to see the 100-point range trading of April replicated around current levels.

DAX looks to bounce
A dip through 11,300 this morning has so far brought out buyers as they look to defend yesterday’s lows. If 11,300 holds, we look for an attempt to clear 11,400 and then on to the 200-hour simple moving average (SMA) at 11,641. The DAX is doing its best to stay above the bottom-end of its current descending channel. The longer it succeeds in this aim, the greater the chance that a bounce towards the top-end around 11,800 will materialise.

It is important to note that even if such a bounce appears it will still leave the DAX in a downtrend, with a only a reclamation of 12,000 cancelling out the ongoing bearish hypothesis. Longer-term, the bears are still in control and the target remains the 11,000 area.

Dow Jones could go either way
Yesterday’s move lower was slightly reversed overnight, and despite an early morning panic in US futures, buyers are still keen to defend Tuesday’s low of 17,900. The Dow Jones still finds itself stuck in a range from around 17,850 to 18,150, making life difficult for trend followers. A break below the bottom of the range would result in a test of the 200-day SMA at 17,488, while a breakout from above 18,150 puts the index back on course for all-time highs.

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