Levels to watch: FTSE, DAX and Dow

Today will mark a sixth day of losses for European indices if markets finish in the red today. Over in the US the situation looks weak as well.

A candlestick chart
Source: Bloomberg

FTSE could slip to 6686

Having slumped through 6800 yesterday, the index is doing its best to rally off the lows so far this morning. At present, this may just be another oversold bounce before a fresh move lower, so any move into overbought territory on the hourly stochastics indicator would be a prudent moment for another short position. So long as daily momentum indicators are still bearish I see little reason to change the outlook – the index needs to clear 6900 once again to reverse the scenario. A fresh downside target lies around 6686.

DAX 10% off April high

The index moved into correction territory yesterday, having lost 10% since its April high. Today the index has opened inside the descending channel we had in April, and so it needs to break through the top end of the channel (11,064) to negate the idea that we will start to explore the levels below 11,000 in the coming week. A short-term oversold reading overnight on hourly stochastics is being worked off, and any bounce in the direction of 11,100 would likely bring out fresh sellers. If we close below 11,000 today then the next stop could well be the 200-day SMA at 10,514.

Dow rallies could see sellers return

US indices took a knock yesterday, with the Dow Jones moving back below 17,800 for the first time since early May. Downside targets lie around the lows of 7 May at 17,700, at least in the short term, while any rally in coming days may witness more sellers come in. Further targets to the downside are in the region of 17,580, the March/April lows. Bounces on the intraday chart are a cue for more selling, so any move in the direction of the 50-hour SMA at 17,840 should be watched carefully. 

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