Levels to watch: FTSE, DAX and Dow

Following a major down day in the indices, some early morning selling is beginning to turn higher. With the DAX at a major support level, Germany will likely lead the way today.

Source: Bloomberg

FTSE selling off from key resistance

Yesterday finally saw the FTSE 100 sell off through 5768 support (August 2015 low), which represents the biggest support level in the past six months. This break is absolutely crucial as there are few major support levels beneath it, hence the strength of yesterday’s move lower.

Overnight the FTSE has pulled back up to that crucial level and posted a gravestone doji prior to selling off once more. Given the continuous/gapless nature of these charts, this means a form of evening star reversal is being created, providing a renewed bearish outlook.

With all this in mind, the bearish view remains in place, where yesterday’s low of 5600 (November 2012 low) represents the main hurdle to get through for the day.

A closed hourly candle back above 5768 would be required for this bearish view to turn more bullish for the short-term. 

DAX sells back into support level

The DAX has also seen a textbook rally back into resistance, with the creation of a gravestone doji candle. On this occasion it is the 9625 level, which marks the lows of both 11 and 14 January. However, there is reason to be a little more sceptical for the DAX, given that yesterday’s selloff bottomed out at the crucial 9300 mark.

This is the low of 2015, with both August and September market bottoms occurring at this level. Thus the existence of the major support level means any bearish view would be tempered somewhat until we pass through this level.

Thus while we have not seen any strong bullish reversal signs, the bearish trend would be expected to pick up stream once more with a close below 9300. A bullish signal would come with a closed hourly candle back above 9625, which would point towards a rally back towards the next resistance levels of 9759, 9942 and even possibly 10166.

Given the major support level in view, it seems more sensible to hold off and await a break of either 9300 or 9625.

Dow starting to gain

The Dow Jones has seen selling dominate once more this morning, following on from a strong end to the session. However, looking at the shorter timeframes, there is a good chance of a rally into the morning today which would likely be driven by any upside in the DAX.

The major support level in the DAX is likely to be the core driver of trading for these other markets. Should the DAX fail to break through 9300 and rally instead, it is likely that it will take the likes of the FTSE and Dow with it.

That being said, we have not seen any bullish reversal signs as of yet and it would take a closed hourly candle back above 15,970 to bring a more bullish tone to proceedings.

Key resistance levels of note are 15,848, 15,903, 15,970 and 16,008. To the downside, the key support level of note is 15,450.

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.