Key index levels: technicals for FTSE, DAX and Dow

What a difference a day makes. The selloff in the tech sector, confusing ‘guidance’ from the Federal Reserve, weak China data and, of course, caution as we enter earnings season in earnest have put bulls on the back foot.

The rhetoric from the European Central Bank is wearing thin, and the attempts to talk down the euro with ‘threats’ of quantitative easing have so far fallen on deaf ears.

FTSE breaches 200-DMA

The FTSE 100 was unable to gain a toehold above the 6680 level and the 100- and 50-DMA, and has now breached the 200-DMA once again. Support should come at 6550, while the rising channel support from the October lows at 6520 will become important should this be broken. Minor bullish divergence on the H1 chart, coupled with rising short-term support from the 20 March lows, is helping to reduce downside currently – we may see a small retracement towards 6590.

DAX fails to break through trendline resistance

Last week’s indecisive trade, which led to a doji formation, has given way to quite the selloff in the DAX. The trendline resistance from the January highs, while tested, failed to give way to upside, and we find ourselves down some 3.3% on the week – 315 points.

The H4 chart is looking oversold, and we are finding some bids in early trade at the 9315/20 level. We can expect that 9410 will act as resistance should any upside retracement take place. The confluence of the 50- and 100-DMA at 9460 will act as the main cap on the index.

Below the 9315 level comes 9230. Rising trendline support from June 2012 may come into view should the selloff continue. This coincides with the 200-DMA at 9140.

Dow gives up gains

Price action on the Dow Jones yesterday all but engulfed the previous day’s gains. Trading below the 100-DMA, any break of the 16,150 level would put us on a course towards 16,030 – last seen in mid-March.

The break of channel support from the February lows and key resistance at 16,455 has capped the gains on the Dow, and the prospect of breaking the 16,600 level with any real conviction seems to be on a distant horizon for now.

Retracements to 16,220 are likely – any break to the top side of the current range may be capped at 16,280, then 16,333.

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