Levels to watch: FTSE, DAX and Dow

A pause in European indices points to the possibility of a retracement lower following a strong recovery in western markets. 

A trader looking at a screen
Source: Bloomberg

FTSE pauses strong start to the week

The move higher in the FTSE 100 this week has brought it back from the brink, to a place where people are beginning to be bullish once more. However, there are signs that we could be due a retracement, with the failure to create new highs above 6858 and a new low created this morning. As such, I am awaiting the next leg to see if we are going to push towards the head and shoulders projection (6870) or retrace back towards 6808. Thus a move below 6833 would provide a more bearish outlook for the day, whereas a move above 6857 would look like a continuation higher.

DAX halts at key trendline resistance

Much like the FTSE, we are seeing signs of a slowdown in the DAX and that heightens the chance of a move lower. The trendline resistance dating back to early April is also joined by historical resistance at 11,618 and that confluence appears to have provided enough to push the price lower for now. I am therefore waiting for a move below 11,518 to give me confidence of a retracement to 11,448 support. Otherwise, a move above 11,618 would be a strong bullish indicator and would point towards 11,800 and 11,926.

Dow consolidates above key support level

The Dow Jones has seen a significant drop-off in volatility over the past day or so, which has brought about a number of retests at the crucial 18,112 support level. A move below this level would point to a strong move back towards 17,988. However, we are continuing to see moderate new higher highs and lows, which gives me confidence that we will more likely see a move back towards 18,190 today.

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