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Levels to watch: FTSE 100, DAX and S&P 500

European markets are showing some signs of a possible pullback, with the FTSE 100 breaking below trendline support and the DAX testing key swing low support.

IG Analyst

Publication date : 2018-05-24T09:37:36+0100

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FTSE 100 breaks below trendline support

The FTSE 100 managed to break below trendline support yesterday, with overnight consolidation providing a heightened chance of a shift lower from here. On previous occasions when the index broke into the bottom of the Bollinger band, we have seen the price turn higher soon after.

As such, with the price now trading near the bottom band, a sharp move lower and close below the bottom band would go a long way to signaling a bearish reversal signal. Until then, there is still a chance we could rebound from Bollinger support.

FTSE 100 price chart

FTSE 100 price chart

FTSE 100 price chart

DAX trading at critical support level

The DAX has turned lower from a confluence of an inside trendline and 76.4% Fibonacci retracement, leading to a significant drop yesterday. However, this has brought us into a crucial support zone, with the low of the day coming at the middle Bollinger band 20-day simple moving average (SMA) and ascending trendline.

More importantly, this is also the prior swing low of 12,916, which must be broken to provide a bearish outlook for the coming week. As such, the ability or inability to break below 12,916 will be a key determinant of DAX sentiment going forward.

DAX price chart

DAX price chart

DAX price chart

S&P 500 range-bound following key upside break

The S&P 500 index has been trading within the 2701-2742 range over the past two weeks. This consolidation follows an important break above the 2718 high from late April. Given that break through 2718, there is a good chance the ultimate break from this pattern will be bullish.

However, with both the FTSE 100 and DAX showing some signs of potentially rolling over, it makes sense to await a break from this range to signal market direction from here on in.

S&P 500 price chart

S&P 500 price chart

S&P 500 price chart

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