Levels to watch: FTSE, DAX and Dow

Modest losses have been seen in European markets this morning, after a weak session last night in the US.

Chart
Source: Bloomberg

FTSE continues to flounder
For a second day yesterday, the index failed to hold above the 6700 level despite testing it. Now it is coming under renewed pressure, helped along by weakness in banks and mining companies. If the selling today becomes more sustained, I would look towards the 6630 - 6640 area as possible support, with the 200-hour simple moving average at 6626 the next destination. More downward pressure should take us back in the direction of 6500, where the index bottomed in late July. Bulls need to push back through 6700 to restore the upward momentum lost yesterday, with a further move towards 6720 still needed to put the buyers back in charge.

DAX remains bullish
It was a strong day for European indices yesterday, Greece excepted, with the DAX continuing its bounce from the 11,000 level. Daily stochastics have finally shifted and look above to give a bullish crossover, but I would be cautious until the index pushes beyond 11,500. The upside target is still the mid-July highs around 11,800, while bears will need to push the index back below 11,270 to confirm that the brief rally has ended.

Dow Jones struggles along
With US markets looking particularly weak, the sellers will be looking for a move towards the July low of 17,400 once yesterday’s lows near 17,500 are breached. If 17,400 is lost then the way is open towards the lows of the year – around 17,200 – and potentially as low as 17,000. Any bounce must clear 17,800 to reverse the bearish outlook.

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