Levels to watch: FTSE, DAX and Dow

An uncertain picture is developing in global markets this morning, with discouraging Japanese GDP figures and the disappointment from Friday’s non-farm numbers still casting their shadow.

Source: Bloomberg

UK markets are under pressure from developments in the Scottish referendum, and while Germany is still just about in positive territory, the broader focus remains a cautious one. The ceasefire in Ukraine still appears to be holding, albeit tenuously in some places, but with Japanese GDP hitting its lowest reading since the first-quarter of 2009, markets are finding it hard to turn up some positive catalysts.

FTSE focus back on 6800

This morning’s Scotland-inspired slump takes the index back to last Tuesday’s levels, through key support around 6830. The loss of this level puts the focus back on 6800, but even a drop to 6780 (around the 100-day moving average) would still leave the bulls with the upper hand.

The index was noticeably overbought last week, so the move lower could be viewed as the market working off this condition, with the weekend’s developments providing a handy excuse. The hourly chart shows the first real drop through the 200-hour moving average since 31 July 2014, but with the intraday relative strength index oversold another bounce may be in the offing. Should the index drop through 6780 the next target becomes 6750.

DAX still targets 10,000

The rally here has finally run out of steam, having seen the index gain 3.5% since the beginning of September.

The 9800 level is now the resistance that must be broken if the index is to maintain momentum in the direction of 10,000. However, the DAX may seek to emulate the FTSE 100 as it has now hit overbought levels. A continued drop would see the index challenge the 100-DMA around 9750, and then the 9620 level being potential support.

Dow could find support at 17,070

The all-time high around 17,154 still remains the big resistance level that the Dow Jones must clear decisively to be in with a chance of moving into uncharted territory. The strong finish on Friday gives hope that the index is still looking to achieve this aim, even if futures are a little weaker this morning.

On the downside, 17,070 is immediate support, followed by 17,018. A drop through here would carry us towards 16,900, around the 50-DMA. 

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