Levels to watch: FTSE, DAX and Dow

The potential ramifications of an independent Scotland continue to ensure softness in the main UK indices, and this coupled with fears of a more hawkish Federal Reserve on Wednesday is continuing to weigh on sentiment.

Scottish road sign
Source: Bloomberg

The fact that UK CPI came in at 1.5% year-on-year as expected, certainly tends to cement the view that the Bank of England will delay any interest rate hikes until this metric adheres closer to the target of 2%.

FTSE still rangebound

The FTSE remains rangebound with little investor desire to push the index convincingly over the 6800 level. It has now shed 1.8% since the 14-year highs reached at the beginning of September. A push through 6830 is necessary if we are to make any trips back up near the all-time highs set back in 1999.

The 6770-80 level remains supportive but any close – on a daily basis – below here could see price action venture further to the downside, with a test of the 50-day moving average at 6755 likely. The relative strength index on the daily chart suggests that momentum may be building towards this.

Although slightly oversold in the short term, the bearish channel on the one-hour chart indicates that any fall through these averages could settle towards the lower band of the channel which coincides with the 200-DMA at 6720.

Dow could retest yesterday’s lows

Yesterday’s lows on the Dow Jones at 16,927 meant the price did not quite make it all the way back towards the 50-DMA at 16,913, but this remains a line in the sand in the short term.

The index failed to break through 17,160 and challenge the top band of the bullish channel from October 2013, and with a falling RSI – while below the 17,000 metric – we may be looking at sideways action in the near term at best.

There is some support to be found at 16,990 presently, and price action may meander between this level and 17,050 (200-hour MA) in the absence of any catalysts.

Anchored around the 50-hour MA this morning, any decline through here could see a retest of yesterday’s lows.

The target on the upside, should 17,160 see a convincing breach, is the 17,300 level.

DAX residing below 100-DMA

The DAX, having failed to gain a decent toehold above 9800, has now resigned itself to residing below the 100-DMA. The area around 9666 is capping any upside, so we should keep an eye out for any declines through yesterday’s low of 9582. This could send the DAX back towards the 200-DMA at 9553. Be alert for the death cross on the 50- and 200-DMA from earlier this month. Any major pullbacks through 9500 (50-DMA) could see a plethora of stops triggered and ultimately see the 50% retracement, of the move from the 10,050 highs to the lows seen on August 8, breached.

For now the bullish channel on the one-hour chart is intact, with 9580-9600 finding buyers.

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