Levels to watch: FTSE, DAX and Dow

Markets are in the red once again, with Europe’s nascent rally hamstrung by the sharp drop in US markets yesterday evening. 

Trading data
Source: Bloomberg

The beginnings of fresh spasms in Greek politics, as the parliament begins choosing a new president, a slew of key UK data and a Federal Reserve decision this evening are all conspiring to keep markets on the back foot.

Those watching for the beginnings of a seasonal rally had their hopes raised yesterday, as markets shook off weakness to race higher. However the US seems to still be operating on a ‘sell the rallies’ basis, and so this weakness has dragged us lower in opening trading. There is still reason to think that markets may have bottomed for now, but the rally (if it survives) will need to get through today relatively unscathed.

FTSE 200-week MA still holding

Bulls will be pleased to see the 200-week moving average still holding as support on the downside, while the daily chart seems to point to support holding at 6200. Now we need to see a close above the 6300 level, which has proved too much to ask on the first two days of the week.

The daily RSI is off the lows seen yesterday, however, while other indicators such as the stochastic momentum index are rising, with the SMI seeing a tentative bullish crossover.

On the hourly chart, the index is holding above 6250 for the time being and the 50-hour MA, a sign of reasonable buying, although we need to see a bullish crossover of the 50-hour with the 100-hour to become more excited about the current state of play.

In the first instance, the index must clear yesterday’s 6350 high, while any breach of 6150 opens the way to a test of the lows of October around 6060.

DAX consolidates gains

Having tested the waters around 9200 the DAX is continuing to consolidate yesterday’s gains, even if it sits below yesterday’s close. The 50-DMA held up well yesterday as support, and if we can see a close above the 200-DMA in coming sessions the index will seem to have recovered from its December selloff.

Like the FTSE 100 the DAX is back above the 50-hour MA, but still has to clear 9500 and then yesterday’s high around 9580. If it achieves this then it opens a way to 9700, while renewed weakness pushes us in the direction of 9300, then 9140.

Dow nervously awaits Fed announcement

US markets are still looking weaker, which is understandable given their central bank announces its final decision for 2014 later this evening.

However the Dow Jones has found support for a second day at the 100-DMA, while the heavily oversold reading on the daily RSI has begun to reverse.

On the hourly chart however the picture is still gloomy, with the selloff yesterday taking the price back below the 50-hour. A base may be forming around 17,070, but the index must successfully clear the 50-hour MA on a more solid basis. Success here would target 17,400 and then on to the 200-hour at 17,590. A drop below yesterday’s lows suggests a test of the zone around 16,890.

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.