Technical analysis: key levels for FTSE, DAX and Dow

Indices continue to look indecisive, but that is to be expected when most of the week’s heavy newsflow is still to come.

Man studies trading data on a number of computer screens
Source: Bloomberg

FTSE struggles above 6800

If the price action of recent days and this morning has taught us anything, it is that the FTSE 100 is not particularly content staying above 6800.

For a week now the index has done its best to move higher, but each day sees an inability to sustain gains above this key level. 6830 was a big hurdle in earlier sessions, but now even 6820 seems too much to ask.

Thus we find ourselves caught between support at 6770 and resistance above 6820. A falling off in the daily relative strength index suggests yet another weakening of buying pressure, leaving the index exposed to another drop back in the direction of 6700 should 6770 give way.

DAX tests upward trend

A real test of the upward trend in the DAX is now underway, with the fall-off from 10,000 providing the first sustained dip in the rally in a number of weeks.

As Brenda Kelly pointed out yesterday, it is now the June 2012 trendline that needs to hold here. This line runs very close to the 200-DMA too, and the confluence of the two elements may well prove to be the means by which the rally begins.

Yesterday’s trip in the direction of the 200-DMA saw the buyers step in, so for now the trend is holding. We continue to see declines for the daily RSI, MACD and stochastics, so until these turn around a degree of caution is required.

Any rally needs to break 9700 and ideally move back above the 20-DMA for another attempt on the 9800 level, while the downside for now should be capped by the 200-DMA, currently around 9500.

Dow upside scenario prevails

The Dow Jones has now opened below its 20-DMA for two days in a row, the first time this has happened since May. The loss of 17,000 will have some bears growling in eager anticipation of further losses, but until 16,930 is lost the upside scenario still prevails.

The price got close to the 50-DMA yesterday, but once again finished a safe distance away. Ideally the daily RSI needs to turn higher and move back above the 50 mid-point to confirm the strength of the move, with a positive crossover in the MACD also signalling the end of the temporary period of weakness.

If the upside does predominate, a close through 17,150 is needed to back up the idea that the rally is once again in play. 

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