Levels to watch: FTSE, DAX and S&P 500

The new week has begun in the manner that the old finished, with weakness in European markets. This may be the beginning of a more sustained pullback.

Data board
Source: Bloomberg

FTSE 100 expecting further weakness
Having seen the index pull back at the end of last week, we continue to expect further weakness in the coming few days. 6300 has stemmed losses over the past week or so, but a close below here will open the way to 6246 and then down to the 200-day SMA at 6206.

Bounces may continue to be sold, so any rally towards 6350 or even to 6375 might encounter fresh selling pressure. At present the index looks oversold intraday so a bounce cannot be ruled out. It would need a close back above 6350 to suggest that the weakness of the past few sessions has run its course.

DAX still relatively oversold
Choppy price movement has prevailed in the aftermath of the ECB meeting, with the DAX seemingly stuck between a desire to move lower along with other global indices and a push upwards on the basis of continuing loose monetary policy at the ECB.

This may prevail until we move below 10,320, which should signal the end of the tight range. However, with the index still relatively oversold a bounce here is also possible, so bears may want to hold fire until that happens, perhaps with another bounce to 10,400 before the real dip begins.

Any firm move back through 10,450 would unravel the negative outlook and shift us back towards a bullish stance.

S&P 500 looks to put bears in charge
The risk for S&P bears here is that the index replicates the movement of early April, when a shallow pullback took place and served to bring out fresh shorts before moving higher once more.

Again, as with the FTSE and DAX, it may prove sensible to allow the index to bounce, perhaps with intraday stochastics moving back to overbought levels.

Price action would indicate that a move below 2080 confirms that sellers are in charge, although some support is possible around the low of last Monday, in the region of 2065 – 2070. A break below here would head towards 2036 and the lows of early April. 

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.