FTSE 100, DAX and Dow slump into critical support levels
FTSE 100, DAX and Dow are on the slide, yet key hurdles remain if we are to call the beginning of another wider market sell-off.
FTSE 100 continues its decline from Fibonacci resistance
The FTSE 100 has been on the slide this week, following a rally into the 61.8% Fibonacci resistance level at 6003. There is no doubt that we could be in a position where this index could be forming a major top, yet that wider bearish signal only comes with a break below the 5666 level.
Until then, it is a case of following the short-term downtrend until that has been debunked. As such, a bearish short-term picture is in place until we break through the prior swing high (currently 5879). To the downside, the next notable support levels come at 5799 and 5748.
DAX drops into critical support level
The DAX appears to be ahead of the FTSE 100 in its decline, with the pair breaking trendline support to trade within touching distance of the critical 10,369 low from early May.
A break below that point would signal a high likelihood that we have seen this market top out. Nevertheless, with the stochastic looking to have potentially bottomed out, a break through the 20 level could bring a bullish swing in momentum. Ultimately, the outlook for the DAX will be determined by the ability or inability to break through the 10,369 low.
Dow Jones declines take index back to key support
The Dow has similarly declined into a critical area of support, with the ability to remain above the 21 April low of 22,940 key for bulls. A break below the point would bring the lowest level in over a month and potential herald another strong move lower almost two months after the mid-March bottom.
Much like the DAX, the stochastic is crossing over within oversold territory. That may not provide a bullish signal, with a rise through the 20 mark required for such a sign. Looking at the past three occasions of such a break back up through the 20-mark, they have providing strong buying opportunities for the index. As such, we await a break through 22,940 (bearish) or through 20 on the stochastic (bullish) to guide our next move.
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