Technical analysis: key index levels for FTSE, DAX and Dow

Investors have focused on the more positive elements of a mixed bag of PMI data from the eurozone this morning. France may still look weak, but the German data in particular seems to have emboldened risk sentiment helping to push indices higher.

Source: Bloomberg

FTSE fails to reach 6800

Despite yesterday’s push through the 50-day moving average and a two-week high established at the 6822 level, the FTSE 100 failed to close above 6800.

The base support at 6770-5 is once again coming into its own, with plenty of buying evident at that level in early morning trade. Staying above this zone would put the bias on another challenge at the 6800 level. Breaking yesterday’s intraday high would help put the FTSE on a firmer footing if the 6880 levels are to be targeted in the near term.

Below 6770 would bring the 6736 level back into view.

50-DMA hinders DAX

The 50-DMA is also preventing the DAX from breaking higher. The index has been caught in a range with the 100-DMA at 9640-50 acting as a floor over the past number of days.

Yesterday we saw a small but short lived foray above 9800 so it would be good to see a daily close though here, to enable us to make a bid for the 9850-60 zone. On the one-hour chart the trendline resistance from the 10,030 highs, back on 7 July, is still preventing this market from moving higher in the short-term. It looks like we may be attempting to pierce this area in early trade so a push through 9780 today would be useful to break this short-term downtrend.

The 9700 level is holding and price action remains above the 50-, 100- and 200-period moving averages on the same time frame. Any moves down through here would see us target 9650.

The hourly relative strength index has a great deal of momentum and is not overbought.

Dow could test 17,150

The Dow Jones has found a base at 17,050 over the past three trading sessions and while above this, the likelihood of a test of the all-time highs at 17,150 seems likely. I remain a little wary of the negative divergence on the daily RSI. This, coupled with the rising wedge pattern, suggests that even if we do manage to break through the overhead resistance, the price action may find a profit-taking zone at the 17,200-30 level (wedge resistance).

Who are we to argue with the bullish trend? The hourly chart sees price action above the key moving averages and the RSI is showing decent momentum. A break of 17,133 puts us on a move to the top of the rising channel, in place since 29 May - this could well see the Dow exceed the 17,150 level.

A break below 17,090 puts us back to 17,050-5. The round number at 17,000 is a decent overall base for now.

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.