Levels to watch: FTSE, DAX and Dow

Last week’s selloff appears to have provided the perfect platform for a bullish start to the week, yet fundamentals provide potential obstacles.

Data reflected in a persons glasses
Source: Bloomberg

The ongoing Greek story will continue to dominate this week, as the failure of a breakthrough this weekend gives until Friday to find the funding for a €300m International Monetary Fund payment. Elsewhere, the first week of the month means we are looking at a whole raft of economic releases which have the potential to rock markets. Today is likely to be dominated by the release of manufacturing PMI numbers across the eurozone and in the UK.

FTSE's momentum could carry it to 7065

The selloff seen on Friday bounced perfectly upon the ascending trendline that has been propping up price action throughout 2015. The clear respect of this trendline provides confidence that we are set to bounce higher and currently that is happening. As ever we are watching 7065 as the main resistance to watch out for. A close above that level would be bullish, yet in the past we have rarely managed to do so for very long.

Thus I am bullish for a move back to 7065 in the early part of this week, yet the manner in which it engages with 7065 will provide an indication of whether we will continue to range or are going to set a new high this week.

FTSE chart

DAX upside reliant on Greek funding solution

Friday’s sharp selloff saw the German index close precisely upon the 100-day SMA. The buying that has begun to ensue today is a sign that we could have seen the end of this recent correction lower. However, I will want to see the DAX move back above 11,618 to gain confidence that this marks the bottom of this correction.

I do expect us to move higher in the near future, but am also aware that any major upside is likely to be held off until some sort of short-term funding solution is announced for Greece this week. Once (or if) that happens, I expect a swift move back towards 11,930 and 12,400. Should we see any short-term move below the 100-day SMA, it is likely that the 11,300 mark would provide the ultimate backstop to selling (descending trendline).

DAX chart

18,160-18,190 key indicators for Dow

Much like the FTSE and DAX, the Dow Jones is looking for a resurgent start to the week following selling that dominated the final week of May. However, unlike those indices, this move higher is not based on any obvious support level which worries me somewhat. That being said, the trend certainly appears to be towards strength in the equity markets today, and I will be watching for a move above 18,160 and 18,190 which would be crucial bullish indicators.

I am bullish, yet less so than the FTSE and DAX. Therefore, an ability to create new intraday higher highs will be crucial to convincing me that the selloff is over.

Dow Jones chart

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