Levels to watch: FTSE, DAX and Dow

Equities have started the week on a softer note in the aftermath of a blowout non-farm payroll number last Friday. 

A chart
Source: Bloomberg

This week does not have the same significance as last week, but we will have the likes of US Jolts, retail sales and China CPI to keep us entertained as we head towards the holiday season. December is normally a bullish time for equities, particularly the last two weeks of the year. Thus, the current downside could present an opportunity.

FTSE still capped by 6770

The FTSE remains capped by the 6770 level and price action has been moving sideways with the 6640 level holding any downside corrections since mid-November. Any breach through either metric could result in a measured move of around 120 points over the course of the next couple of weeks.

The potential triple top on the four-hour chart should be watched closely.

The 200-day moving average around the 6696 level is, for now, holding but any daily foray and close through it could see the 50-DMA garner renewed importance at 6640-50.

The hourly relative strength index is looking oversold and we are currently testing the trendline support from the October 21 lows. With the confluence of the three major averages and prices remaining below – it now appears that the 6720 level will be a tough ask in the intraday.

10,111 hinders DAX progress

It’s still worth noting that the RSI on the weekly chart is indicating negative divergence. This is in spite of the fact that the index has managed to break the 10,000 level following the better US payrolls number.

The highs of 10,111 are keeping a lid on additional gains today, but a break above would see us head towards 10,150-60.

The previous highs at 10,040 are lending support but we cannot rule out, given the falling daily RSI, a pull back towards 9990 –  the midpoint of Friday’s daily candle and the 50-hour MA.

The next support below that is 9890, aided by rising support from the lows in mid-October.

Dow RSI showing bearish divergence

We saw a brand new high on the Dow Jones but it stopped short of the elusive and much-desired 18,000 point. Again, I point out that the weekly RSI is showing some serious bearish divergence, and that price action is touching the top band of the long-term bullish channel. The daily RSI is also starting the retreat so it will be worth watching to see if the 17,900 level is punctured today. (100-hour MA)

Intraday, it looks a little oversold.

A move through 18,000 will be met with fanfare, and possibly some profit-taking, with the next upside pivot coming in at 18,007.

A decline through 17,900 targets 17,850 (200-hour MA). Key support is at 17,812.

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