Technical analysis: key levels for FTSE, DAX and Dow

Last week, the plethora of geopolitical and risk events, coupled with some speculation of higher rates from the Federal Open Market Committee, added up to what was possibly one of the more volatile weeks this year.

Electronic stock board
Source: Bloomberg

The Dow Jones had its single worst day since February and finished the week down 2.8% – also the largest weekly loss since February.

This week brings Asian and European PMI data and some interest rate decisions from the Bank of England, Reserve Bank of Australia and the European Central Bank, so we can expect to see a little choppiness in the FX pairs which may lend some volatility to the indices.

FTSE eyes 6700

Friday’s trade saw a FTSE low not seen since April, but the 6623 level was well bid and this buying has essentially helped to push the index to test the 6700 level this morning. The 200-daily moving average stands in the way, however, and given that we failed at this level last week, it will be an important metric in the next few days. The rising trendline support from the June 2012 lows lies here too, and is, for the moment, acting as a resistance to any upside moves.

The hourly chart also indicates that the 50-hour MA is stopping a move higher around 6700. While below here there remains a risk of a move to 6640/50 and, should this fail, last week’s lows should be watched for any breach that would enable the FTSE to break down towards 6600.

A move through 6705 would target 6735/40 and then 6775.

Dow back around 16,500

As stated last week, the rising wedge formation has completed on the Dow, with price action back at 16,500. The 16,500 level is very important here as it marks the rising trendline support from November 2012 lows. The trend from this period is technically intact.

The Dow closed at 16,493 on Friday, despite making a low of 16,435, but looks to be stabilising at this round number in the futures markets this morning. Beneath that is the 200-DMA at 16,360. The relative strength index is looking oversold on the same timeframe but is beginning to turn upwards. Should this start moving higher (above 30) it could bring about a move back towards the 100-DMA at 16,658, with 16,730 the next resistance point.

The inclination to watch last week’s lows is certainly there – any move through 16,435 would target the May lows at 16,340.

DAX worst hit by volatility

The DAX has fared the worst out of this bout of volatility and risk-off sentiment, even marking a new low of 9140 in early trade today.

RSI is quite oversold on the daily and starting to look that way on the H1 chart again. The break of the 200-DMA was something of a nail in the coffin for this index, particularly since it had held so well in the past. Currently trading at 9162, the next support is at 9085/90 (April lows and the 61.8% retracement from the October 2013 lows to the all-time highs).

The level 9270 represents resistance, then 9300. The 100-hour MA coinciding with 9480 would be a decent level to break if this downturn is to see any respite.

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