Levels to watch: FTSE, DAX and Dow

Deflationary concerns come to fore, resulting in the majority of global indices beginning to pull-back off their short-term highs. 

A man walking by a chart
Source: Bloomberg

A continuation of the bearish move in commodities has shown no sign of slowing. This has now begun to impact the wider market indices, which in turn are beginning to breakdown over the short term as the threat of deflation continues to leave market risk somewhat uncertain. The result has been that those market players who have held onto long bets, in markets that have almost routinely posted multi-year highs, have begun to back off, with net-long positions being cashed out ahead of the holiday period.

FTSE bears remain firm

The FTSE 100 has had no respite since the current bear trend began on Monday, which has since seen a drop of -5.79% to its current level of 6,376; the levels to watch don’t bode well for those waiting to buy a reversal. Despite the sharp move lower, the index has only just edged into oversold territory according to its relative strength index, which shows a reading of 29.01.

The move into oversold territory will likely spur some short-covering as well as those attempting to buy a cheap reversal, but should a close below 6,358 be seen it will likely then bring 6,280 into play. However, if the 6,358 level holds then a retest of 6,456 is likely.

DAX backs off the highs

The DAX has continued to breakdown, coming off its recent highs by -4.13%, and is currently trading at 9,748, which is immediately below the topside immediate risk range at 7,749. If this is held, we could see a further move lower to 9,667. On the other hand, a close above 7,749 could see a retest of the upside range of 9,827.

Dow in search of support

The Dow Jones is currently -3.04% off its weekly high, trading at 17,456 and is likely to find support at 17,450 – a level which if held could see a reversal back up to the 17,517 level over the short-term.  However, should a close bar be seen sub-17,450 then it’s likely to result in a move lower to 17,367.

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