Levels to watch: FTSE, DAX and Dow

Indices have opened more positively this morning, but at present it seems little more than a short-term bounce.

German stock exchange
Source: Bloomberg

FTSE could head to 6680

Having seen the index shed more than 200 points in June so far, the question is now whether the bounce this morning is the beginning of a turnaround. For the moment, so long as daily stochastics are still bearish, I would remain inclined to think more downside is the order of the day. The region from 6800 to 6850 will be a key point in determining where the market heads next – this area has provided resistance in the past few sessions, so its recovery will be crucial.

Those looking to jump back on the downside should be careful, since the index is now oversold for the first time since mid-December 2014. Thus caution is the prudent course, with bears waiting for an indicator such as stochastics on the hourly chart to reach overbought levels, rather than rushing in too early.

The index now finds itself at the 200-day simple moving average (6747), which may provide a point at which a bounce can begin. A failure to hold this would mean we head towards 6680 in the first instance.

DAX could target 10,862

The DAX has rallied off the lows yesterday below 10,900, but this morning finds itself butting up against the top end of the descending channel that dominated in April and early May. If the index can stage a recovery at 11,100, then the next area to watch for is the 200-hour SMA at 11,292.

If we drop back from current levels then Tuesday’s lows around 10,862 become the immediate target, with a more extended move heading towards 10,650.

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DAX chart

Dow eyes move above 17,900

US markets look more positive than their eurozone counterparts, with the possibility that daily stochastics are beginning to turn higher. A positive crossover, which would suggest higher prices are on their way, has yet to be seen, so buyers would be wise not to go all in just yet. The price has moved back above the 50-hour SMA (17,800) for the first time in a number of days, which will trigger some buying, but a move back above 17,900 is needed to provide further confirmation.

If a Dow Jones rally does begin, and a rising daily relative strength inedx does support that theory, then we look towards the 18,100 area, and then towards the all-time highs above 18,300. 

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