Levels to watch: FTSE, DAX and Dow

It bears repeating that markets underwent a similar correction exactly this time last year, with the DAX shedding 3.25%, the FTSE declining 6.81% and the Dow losing 5.91% over the a 20-day period. 

London Stock Exchange
Source: Bloomberg

Much is conspiring to hold equity indices back today and much of it is based on realistic fundamentals as opposed to a ‘taper tantrum’. Profit warnings, a move on US tax inversion and plain old rights issues are putting the bears in charge.

Downside prevails for FTSE

Last week’s shooting star candle followed up with a large bearish candle has come good, with the downside prevailing. The rising trendline support from 8 August has failed now, so a close eye on last week’s 6760-70 level is warranted. I’d look to see the FTSE move towards 6620 should this level give way. Only a move back through 6815 then 6830 could put the FTSE back in contention for a move towards the recent highs. 

DAX sees additional selling

For now the DAX, having dropped back through 9706, has seen additional selling as the uptrend supports from the 8 August lows have been breached. The 9611 level and the 61.8% retracement from the highs to the recent lows are very important now – a move through here targets the 200-day moving average at 9570.

Dow finds resistance at 17,200

The Dow Jones has pulled back towards 17,120 and is finding support at the 200-hour MA. Resistance now lies at 17,200 – we would need to retake this level if the index is to recover.

Watching now for a move back towards 17,094 (61.8% retracement from the 8 August lows to the all-time highs) – this would be something of a line in the sand.  A move below the 16,945 would cause a problem, and this could well represent a precursor to a decline towards 16,800.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.