Levels to watch: FTSE, DAX and Dow

European indices are channeling lower in short term, while the Dow continues to push higher towards a major resistance level.

A candlestick chart
Source: Bloomberg

FTSE breaks lower, yet forms bullish falling wedge

Yesterday saw the FTSE breaking below the lower end of the symmetrical triangle that has been in play over the past month. However, as ever the most important thing is to create a new low, which would mean a move below 6489, which did not happen. Thus while we did get a relatively bullish indicator by breaking the ascending trendline, we remain in a place where higher lows are in place.

The price has very recently started forming a falling wedge formation, which when seen in a downtrend is generally countertrend. That means it is a bullish indicator and would more often than not result in a move out of the top. However, until that happens it could be prudent to expect the wedge to remain in play, and thus a short-term move lower seems likely.

Ultimately for me to see an indication of a major move in either direction, I would need to see a break below 6489 or above 6602.

DAX at near-term support

The DAX is trading within a short-term channel following the recent selloff. However, we also have the 10,893 support level to watch out for. This is Wednesday’s low, and from early price action there is a possibility that we could see the price break higher from this point. Should we see a break above 10,990 then I would expect a move back to the top end of this channel, around 11,085. Otherwise, a move below 10,893 would push towards a move to the lower end of the channel, around 10,800.

Dow continues to break higher as it charges to towards 17630

The Dow Jones continues to break higher following the move out of the top of the falling wedge formation seen in recent months. The most important thing to watch out for to signal a possible longer-term recovery is for the index to move above 17,630. Thus for now, I do expect us to see further gains in accordance with the recent trend. However, the 17,630 level is the most important challenge for the overall sentiment. Key near-term support levels to watch are at 17,484 and 17,465.

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