Levels to watch: FTSE, DAX and Dow

A bumper day yesterday for indices saw strong gains across the board, with bulls looking to maintain momentum this morning.

Two women walking past a data board displaying charts
Source: Bloomberg

FTSE could see moderate pullback

The index finds itself at a crucial point, having closed above 6300 for the first time since mid-August, and above the 50-day SMA (6280) for the first time since 7 August. With four days of gains behind it, it is now crucial for buyers to keep the index moving forward. Upside targets now lie around 6370 and then 6423. It is too early to suggest that the gains of the past two days are about to be reversed, but from the look of things a modest pullback is not out of the question. If the index moves back below 6300 early on today and stays there, then the four-hour chart (using MACD as a guide) may be handy to take advantage of any temporary drop.

Support is likely to be found around 6280 and then 6235, with a bigger move heading back towards 6135.

DAX pause could see buyers step in

Here the overnight session has seen the index pause just shy of 9870, after a very impressive bounce over the past two sessions. A move back below 9800 should be watched with interest, as it would risk a drop to 9710 and then 9560. Admittedly indicators such as the MACD on the daily chart are still bullish, but on the hourly chart there is now the possibility of a drop that will allow buyers to step back in. Any extension of bullish momentum will head towards 9948 and then 10,038, although it is important to note that this index has still to breach the September highs around 10,300 – 10,400.

Dow meets resistance at 16,780

The Dow Jones said hello to the 50-day SMA (16,744) for the first time since mid-July, having added 700 points since Friday’s low. 16,780 however is the problem area, with a close above here crucial to the maintenance of any rally. In the face of this, we may see a pullback, possible as far as 16,528 and then 16,386. The hourly RSI on this index is still pulling back from overbought levels, so until this starts to rally again the buyers may find it hard going. A break through 16,800 would be a strong development, targeting 16,945 and then on to 17,000.

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