Technical analysis: key levels for FTSE, DAX and Dow

The calm of the Labor Day market has come to an end and we are seeing indices make gains, helped on the way by news from Japan and optimism regarding the European Central Bank.

Mario Draghi
Source: Bloomberg

Indices have put the dull trading of Monday behind them, posting reasonable gains as the month’s trading gets underway in earnest. Data from Japan shows that wages are continuing to rise, allaying fears about consumer spending. The impact of Abenomics has been doubted recently, but for now at least there seems to be grounds for optimism.

For Europe the focus is still on the ECB, with some commentators openly predicting the possibility of some form of action. Caution rules here however, especially since Germany (both in the form of the Bundesbank and the government in Berlin) remain implacably opposed.

FTSE on target for 6875

As per Brenda’s comments yesterday, the breach of the 6830 level seen this morning means the FTSE is now on target for 6875. From then on we know the story – 6880 and above has been a significant hurdle to this index, but a break through this area would leave us on course to try to hit 6930, the all-time high from 1999.

Support could be seen around 6800-6805 if the market weakens, and then down to the upward trendline which runs from mid-2013, providing potential support around 6750.

9600 could hinder DAX progress

Four sessions of weakness have come to an end with an impressive bounce this morning, rising off the trendline once again just above the 9460 level. To make further progress the DAX must clear 9580, the highs of late August, while 9600 itself could be a stumbling block as well.

The hourly chart shows a steady rise for the index throughout the latter half of August, but the DAX is now heavily overbought on an intraday basis and thus is at risk if 9600 is not broken. A drop back targets 9420 and then 9400.

Dow could see indecisive trading

With futures pointing to a higher open, the question now is can the Dow Jones clear 17,154? An overbought reading on the daily relative strength index means that we might be in for a few more days of indecisive trading, until the market feels ready to move higher.

The 17,018 level is still a potential support level, with the 50-day moving average just below 16,900 also a possible region of support. 

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