Levels to watch: FTSE, DAX and Dow

Weak non-farm payrolls data continues to dominate as indices seek new highs.

Trading floor
Source: Bloomberg

The major indices have been breaking higher following Friday’s non-farm jobs report, which brought a delay to interest rate hike expectations in the US. Despite much of this being attributed to weather effects, there is a feeling that there could be a more serious issue behind this release. For many, this was seen as a green light to continue buying up the major indices and we have seen more consistent buying pressure as a result.

FTSE at 7000, with eyes for 7065 short-term
The FTSE 100 has been pushing strongly towards the upside following a bullish hammer formation back on 1 April, which found support at the major 6680 mark. With prices now back at the significant 7000 handle, I will be expecting a push back to the 24 March high of 7065 in the near-term. Given the upward trend, a move higher than this mark would not be a surprise. However, I am waiting to see the response should we reach that level, then a daily close above 7065 would have me looking for higher levels.

The FTSE 100 has often broke into new highs over the past year, typically though, this has been short-lived and gains above the previous highs have been marginal before another pullback. Thus, any break above 7065 would not necessarily lead to a major move higher. Instead, some may see a break back below 7065 as a better opportunity to short the market given the size of the pullbacks we have seen.

For now I am bullish and expect 7065 and possibly a little higher in the remainder of the week.

DAX looking higher with 12,130 forming near-term resistance
The DAX is attempting to move out of this period of consolidation that has been prevalent since mid-March. The sharp move lower on 26 March was bought back into and actually formed a bullish hammer formation, showing the importance of waiting for a closed candle before calling a breakout. As such, the pair remained within the symmetrical triangle formation and it now looks like we could see a breakout towards the upside today. Irrespective of whether this happens or not, the more important move would be a break above the near term resistance of 12,130 and ultimately the 12,220 high.

The daily MACD histogram is clearly moving higher towards parity, giving us some confidence of a further move upward. However, with an hourly candle posting a possible hanging man this morning, there is the potential that the 12,130 mark will provide enough resistance to keep us range-trading.

I am bullish while the price is above 12130, and do expect to see us return to 12,220. Whether this is going to happen soon or remain in a consolidation phase is the key question for the time being. Ultimately I do believe we will break to a new high soon enough, the question is just when.

Dow channeling lower as we await break higher
The Dow Jones has been trending lower in recent weeks, consolidating much in the same way as its European counterparts. Again in a similar fashion, the non-farms release on Friday caused significant buying pressure and led to a sharp move higher. However, with yesterday’s shooting-star candle, there is clearly some hesitancy behind a more serious move higher in the index.

Prices have been unable to break into a near term higher high, which is a little worrying. The breakthrough may come today however, should prices rise to above 18,010. The long-term trend would say that the index should begin to turn higher soon enough and with Federal Reserve interest rate hikes expectations pushed back for many, this should serve as enough gravitas to push the index higher yet again.

Last week’s inverse hammer formation shows a possible bottom to recent consolidation, I am thus expecting a move higher once the index breaks into a new higher high. Therefore near-term resistance is at 18,010 and should we see a move above that, I would be looking for a staggered move back to 18,200 and 18,280.

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