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Levels to watch: FTSE 100, DAX and Dow

Yesterday’s breakdown for global indices has put the likes of the FTSE 100, DAX and Dow into a precarious position. With the down seemingly leading the bearish charge, further downside is looking increasingly likely for the indices.

IG Analyst

Publication date : 2018-08-16T09:38:06+0100

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FTSE 100 showing signs of wider breakdown

The FTSE 100 tumbled below the 7535 support level yesterday, pointing towards the possible beginning of a next period of weakness. The subsequent rally back into that 7535 level has been fleeting, with the respect of that previous support as new resistance pointing towards the potential for further downside.

Crucially, with yesterday’s fall below 7489, we saw a new three-month low for the index, and that may not be the end. A continued breakdown from here would move us out of a period of consolidation that has lasted two months, and instead take us into the next leg lower for the index. Until then, there is still a chance we will rebound to continue that two-month range.

FTSE 100 price chart

FTSE 100 price chart

FTSE 100 price chart

DAX trading around crucial breakdown level

The DAX has similarly broken into a critical support level, with the fall below trendline and Fibonacci support pointing towards a potential wider breakdown from here.

The ability or inability to break and hold below 12,102 is going to dictate the state of play from here. With that in mind, watch for a break or rebound from that level to signal where we go from here.

DAX price chart

DAX price chart

DAX price chart

Dow rebound gives shorting opportunity

The Dow Jones sold off sharply below the critical 25,114 level yesterday, with that move pointing towards further downside to come. With the price having rebounded since, there is a good chance that we are about to see another leg lower for the index.

With that in mind, this looks like a good opportunity to look for shorts, with a rally through 25,342 going some way to negate the bearish view. Ultimately it will come down to whether we break the 25,700 high. However, there is a strong chance we will respect this swing high and turn lower from here.

Dow Jones price chart

Dow Jones price chart

Dow Jones price chart

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