Technical analysis: key levels for FTSE, DAX, Dow

Indices have come under pressure this morning, as economic data disappoints and Iraq worries predominate, but the long-term picture remains positive.

A man walks past a chart
Source: Bloomberg

FTSE continues its slow upward progress

On an hourly chart it looks like 6835-6840 should provide a significant stumbling block, having stymied progress on the upside today and also on the last two days of the previous week. At the time of writing a battle for 6800 is developing, since this was the low of Friday.

The drop below the 50-day moving average this morning is a worrying signal in the short-term, but it is more symptomatic of the slow upward progress in this index than anything else.

If the index can close above 6800 today the default scenario remains an expectation that we will see 6880 in due course.

DAX finds resistance at 10,048

Although volatility is not particularly evident anywhere at the moment, what little there is can be found in the DAX.

The index did its best to rally through 10,000 on Friday, but that effort has now run out of steam. Upside resistance now lies at 10,048, the high from Friday, while Tuesday’s low of 9858 should cap losses on the downside.

A stronger close above 9950 would be needed if the April upward trendline is not to look seriously under threat, but for now the DAX appears to be more in consolidation mode than preparing for the start of a sustained downward move.

Iraq concerns could hinder Dow

After a weak start, we are already seeing something of a rebound in premarket Dow Jones trade.

Fresh record highs for US indices on Friday should see the start of more enthusiastic buying, as traders follow Jesse Livermore’s dictum to buy at fresh highs. While the index holds up we therefore await a fresh run to 17,000, with only a break through 16,892 on the downside really endangering the current upward move.

The two chief dangers are Iraq and the relative strength index indicator. The former remains a convenient excuse for profit-taking, while the latter continues to move higher. A run into overbought territory would likely herald a period of weakness. 

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