Levels to watch: FTSE, DAX and Dow

Indices attempt a bounce following a very strong selloff yesterday, yet given the downtrend in play, it makes sense to watch for selling rather than play the upside.

US traders on trading floor
Source: Bloomberg

FTSE finds support following selloff
The rally we have seen in the FTSE so far this week was spectacularly undone yesterday at the release of the US crude inventories. The key here was the ability to break back below 5902, which has happened with price falling back down to the 5843 level. The source of continued support this week is represented at 5843 and as such it is no surprise this has held once more.

As mentioned regularly, the bearish medium-term view is in place and thus any upside is seen as temporary. Therefore as long as price is below 6011, it seems prudent to look out for bearish reversal signals.

That said, while we could see further upside, we are watching for another leg lower rather than focusing on the upside. Resistance levels of note are at 5902, 5940, 5969 and 6011. Support levels of note are at 5843, 5812 and 5768.

DAX rally likely to be short lived
DAX is also seeing a bounce this morning, following on from the US fueled selloff late into yesterday’s session. However, this is already starting to fade and much like the FTSE, it seems sensible to work with the downtrend rather than focus on any rally given the fragility of any upside as seen with yesterday’s sudden selloff.

The key level for the DAX is 9625 as it represents both long-term trendline support and the 2016 low so far. However for now, downside is favoured despite the possibility of a short-term bounce and thus intraday bearish reversal signals are worth looking out for.

Resistance levels of note are 9938, 997, 10,018 and 10,068. Support levels to watch out for are 9710 and 9625.

Dow bounce unlikely to last
The same story for the Dow Jones, with the US index posting tentative gains this morning after tumbling lower yesterday afternoon. That selloff brought price down to a new three-month low which provides yet another bearish tilt to this index.

Thus it also seems sensible to watch for bearish reversal signals for another move lower rather than play the upside given the strength of the selloff recently. We would need to see an hourly close back above 16,626 to create any sort of moderately bullish view and thus the bearish outlook remains for another move to the downside.

Resistance levels of note are at 16,318, 16,374 and 16,464, with support at 16,179 and 16,097.

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.