Levels to watch: FTSE, DAX and Dow

The markets’ selloff continues, but with crucial support levels in relatively close proximity, there is a high likeliness of a bounce in the near future.

A man looking at a chart
Source: Bloomberg

FTSE close below Fibonacci support points to further losses

Yesterday saw the FTSE close below 6723, which represented previous support at the 38.2% Fibonacci retracement. As such, today was always very likely to see some losses in the early part of trading.

While the Fibonacci support was an important one, the really crucial level to watch is 6672 as this represents the swing low from 1 April. Alongside that, there is the 10 March low of 6691 to watch out for.

I do expect further losses, but given the extremely oversold conditions (stochastic and MACD at six-month lows), a bounce higher is likely to come in the near future. For now, I am looking for a move to 6672 and will see the reaction to that level.

DAX breaks lower and approaches support zone

Yesterday saw the DAX close below the inside trendline on the four-hour chart, and thus we are now looking towards the next major support to come into play at the 10,856 level (38.2% Fibonacci retracement and June low).

I am looking for a bounce higher from the green triangle, which represents the area between the 10,856 horizontal and March descending trendline. As such, I am bearish but like the FTSE, a bounce would be likely later in the week. 

Dow Jones selloff brings us back to yesterday’s support level

Despite a strong bout of buying in the backend of yesterday’s session, we have seen the sellers come back in this morning, and the signal is that we are likely to see a move down to the 17,686 support level at some point today. This represents the lows from both May and June. The crucial thing about this level is that a break below would represent the creation of a new lower low, which would replicate the more bearish signals coming from the likes of the FTSE and DAX.

For today, I expect a move lower towards 17,686 and if intraday candles move below this level, a move down towards 17,549 would be likely. However, a pullback to 17,686 as new resistance would be my selling preference should that occur.

With the Dow now into its fourth straight week of losses, (last seen in August 2013) there is likely to be some sort of respite soon and, like the FTSE and DAX, I do expect to see some sort of bounce later this week.

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.