Levels to watch: FTSE, DAX and Dow

We're experiencing a calm after the storm as markets wait to decide their next move.

Data on screen
Source: Bloomberg

FTSE pulls back following bounce

Yesterday saw the FTSE 100 recover much of Tuesday’s losses, yet was unable to hold on once price hit the 6070 resistance level. Ever since we have seen a gradual move lower, yet this appears to be a pennant formation, which is continuation pattern. This would highlight a possible move higher.

However, I will only be bullish for another move higher once we see a move above 6050. Until that happens, I expect to continue moving within this gradual grind lower.

Upside resistance would be expected at 6070 and 6123 in the case of a spike higher. Otherwise, a break lower from this pattern points to 5963. In the medium-term I remain bearish given the levels taken out earlier this week. This view will hold unless price moves back above 6170.

FTSE 100 chart

DAX attempting to claw back some of its losses

The DAX has suffered more than most, with the Volkswagen scandal really impacting the index in recent days. The creation of a new short-term high this morning comes off a new low and this highlights the indecision within this market.

Ultimately, I would only gain confidence of direction by seeing an intraday close above 9710 which would act as a good guide that we could see a move back to 9784. Otherwise, I would really need to see a move back below 9459 to gain confidence of the next move lower.

Over long-term I am bearish and believe we could see another big move lower in global indices, yet given the size of the selloff there is always a possibility of a bounce higher. Until those levels are breached, we could see lots more directionless trading between 9710 and 9459.

DAX chart

Dow gradually moving lower once more

The Dow Jones is moving lower, with the 50-hour SMA providing a good area of resistance to cap any upside. This seems likely to continue in the short-term and thus I am looking for a move back down to 16,162 as support and will remain bearish unless price moves above 16,340.

Unlike its European counterparts, the Dow still needs to take out a major level (16,162) to look particularly bearish. Thus should we return to that level it will be crucial as to whether its broken or not.

Dow Jones chart

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