Levels to watch: FTSE, Dax and Dow

Tentative gains are being seen in some European markets, but the FTSE 100 is still in the red, weighed down by a continued ‘risk-off’ atmosphere.

A chart
Source: Bloomberg

The selling has abated for the time being in markets, but there has been little in the way of fresh news to reinvigorate the bulls. Instead the drivers of recent days, including geopolitical tensions and China worries, have abated somewhat. But with some time to go until non-farms and the start of the next earnings season there seems little that can really drive a return to bullish sentiment.

FTSE returns to oversold territory

The 6660-6670 area is still holding for now, while the steep declines over the past two days have carried us back into oversold territory on the FTSE 100. This has proven to be a useful indicator of market bottoms during 2014, with the most recent example seeing a 4.4% gain on the FTSE in short order.

Bulls waiting for a move higher might want to wait until the relative strength index moves back out of the oversold zone and the moving average convergence/divergence turns higher, but an immediate target would be the 200-day moving average at 6730.

Any drop below 6660 targets the August low around 6580 and then towards key support at 6500.

DAX holding long-term trendline

A battle for the 200-DMA is underway, but the index continues to hold its long-term trendline. Any close through here would target 9460, and then 9200.

The daily MACD has turned lower, a rather bearish indicator, since the last time this happened was in early June when the index began its 1000 point slide, while the daily RSI is, for the moment, holding steady at 44.

Assuming 9550 holds then the first target becomes 9600 and then 9630.

Dow holding above 17,000

The Dow Jones is stubbornly holding above 17,000 for the time being, with the index looking far healthier than either the FTSE or the DAX.

The hourly chart shows some modest support around 17,050, but the intraday RSI has yet to break through 50 so gains have been limited. An immediate target is 17,082 and then 17,140.

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