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Levels to watch: FTSE, DAX and Dow

European markets look set for a short-term pullback, while US markets continue to push onwards in the slipstream of a weak dollar and strong earnings figures.

IG Analyst

Publication date : 2017-07-27T09:25:14+0100

Market data figure

Source: Bloomberg

FTSE falls back from head and shoulders pattern

The FTSE has been turning lower from the 76.4% retracement, with the index creating a head and shoulders pattern this morning. That points towards a further deterioration today despite the current rebound.

Bear in mind that the failure to create a new higher low last week was a sign that this recent rally may not necessarily break through 7516 to continue the recent uptrend. As such, a bearish outlook is now in play, with a break through 7460 required to negate this head and shoulders pattern. Until then, this current bounce looks like a shorting opportunity.

FTSE chart

FTSE chart

FTSE chart

DAX showing signs of rolling over

The DAX is no longer trending higher, with the price breaking to new intraday lower lows. This points towards the current rally as being a likely precursor to further downside, with a bearish short- term view in play, as long as we do not break back above 12,344.

The long-term outlook remains bullish and as such, this pullback could be a precursor to a move into the 61.8% or 76.4% retracements (12,218-12,188) before we move higher once more.

DAX chart

DAX chart

DAX chart

Dow continues its ascent

The Dow Jones has no such worries, the continued decline in the dollar helped along by a notably strong earnings season. The chart is clearly very bullish, with new all-time highs being created.

Yesterday’s post Federal Open Market Committe (FOMC) weakness took us back into the previous record high of 21,684, with the price now pushing higher. Further gains seem likely as long as we do not break back below that 21,684.

Dow Jones chart

Dow Jones chart

Dow Jones chart

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