Levels to watch: FTSE 100, DAX and Dow

European indices are outperforming their US counterparts, as the FTSE 100 attempts to break out of its range once more.

FTSE 100 heads into resistance once again

The FTSE 100 clearly has little time for downside, with the price gradually failing to fall into the lower thresholds of its range. Instead, we have seen the price finding support around 7632 over the past fortnight, repeatedly pushing the upper limits of the range.

This points towards the potential for a bullish breakout. However, it is worth noting that the wider trend points towards this period of upside being a potential retracement of the sell-off from 7797, with the 76.4% retracement level at 7723. Should we see the price break through that level and maintain momentum above there, it could point towards a potential break higher from this multi-month period of weakness. Until then, this rally could easily provide us with yet another short-term rally into resistance before we turn lower into the 200-day simple moving average (SMA) yet again.

DAX consolidates after recent rally

The DAX is trading within a triangle formation this week, as the index consolidates in the wake of last week’s sharp upside move.

There is a strong chance this consolidation will resolve with a break higher to take us into the 76.4% retracement at 12,930. A rally through 12,849 would signify a bullish breakout signal from this consolidation. Conversely, a drop below 12,769 would signify a likely short-term pullback to retrace some of the rally seen last week.

Dow consolidating at trendline support

The Dow Jones has drifted into trendline support this week, with the price consolidating around the 61.8% retracement. The uptrend is very clearly defined for this market, and thus we expect to see another turn higher soon enough.

Watch for how the market responds to this confluence of support, with a rally through 25,496 required to negate the recent weakness. While a fall below this support level would signal the potential for further downside, we would need to see a drop below 25,111 and particularly 24,930 to signal the beginning of a wider period of weakness. 

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