Technical analysis: key levels for FTSE, DAX and Dow

Indices have paused for breath today, with signs of a modest recovery evident in the hourly charts of the DAX and Dow Jones. However, the FTSE still appears to be lacking the upward momentum needed for a rally.

A man looking at a chart
Source: Bloomberg

FTSE downward pressure remains

An initial test of 6600 was defeated yesterday, but the downward pressure on the FTSE 100 still seems evident, even if the volatility of last week has dissipated.

For the FTSE to make any meaningful progress to the upside we need to see a close back above 6650, which would then give us the possibility of a move back towards the 200-day moving average at 6708. This moving average represented the limit of any upside in recent sessions. A real bounce would need to recover the trendline running from June 2013.

Any close below 6600 means that the index may well opt for a retest of 6500, the lows of March and April. With no turnaround yet evident in the daily relative strength index, the downside scenario still has the upper hand.

DAX remains oversold

The DAX continues to be oversold, as it lingers just outside of correction territory, having declined by almost 10% since the levels it saw at the beginning of July.

The 9000 level remains the ‘line in the sand’ here, having not yet been tested. Now the index needs to move back above 9200 to begin its recovery, if one is possible at present. If 9000 is broken then the next support may enter the frame around 8750, with 8500 beyond that.

On the hourly chart 9100 looks to be holding, and price action suggests an attempt to move above the 50-hour MA, while a rising intraday RSI and moving average convergence/divergence puts the DAX on a stronger footing, at least in this timeframe.

Dow eyes 16,560

Beleaguered bulls will be relieved to see the Dow’s attempt to dive through its 200-DMA yesterday was beaten back, with the index finding support just above 16,400.

The big task now, in a similar way to the FTSE, is for the index to recover its uptrend, which in this case runs from November 2012. This would ideally involve us trading back above 16,555.

The 20-hour MA has moved back above its 50-hour counterpart, with the price itself now testing the 100-hour moving average. The RSI is rising in this timeframe, along with the MACD, which suggests another attempt to clear Tuesday’s highs above 16,560. 

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