Indices decline, with wider bearish picture emerging
Recent losses point towards bearish trends remaining in play for European and US markets. Particular attention is placed on the Dow, with the US index trading at a critical head and shoulders neckline.
FTSE 100 declines back below key support
The FTSE 100 reversed sharply throughout the course of yesterday, with the index breaking below the 7211 level. That provides a lower low and confirms the recent rebound as a lower high.
Those factors add up to a picture which points towards a move back into the 7136-7145 zone of support. A break below that support zone would see a wider bearish picture coming into play for the following weeks. However, be aware that we could see some form of short-term rebound, yet only with a break above 7319 would we see a bullish picture come into play for the medium term.
DAX continues recent downtrend
The DAX has continued its recent downtrend, with the break below 11,924 creating yet another low for the index.
This move also sees the price breaking below the 76.4% Fibonacci retracement, signaling that this recent downtrend is likely to be a precursor to further downside rather than a retracement. Yes, we could see some form of rebound over the near term given the recent losses, yet a bearish picture remains in play unless we see a rise through 12,124 resistance.
Dow falls into critical support level
The Dow Jones has declined into the crucial 25,220 support level overnight, with the index briefly hitting the lowest level since February. A break below this level would complete a head and shoulders formation, raising the likeliness of another round of sharp losses for the index.
As such, watch for how the index responds from here, with the sharp declines at the start of the week raising the possibility of a retracement. Such a rebound would look like a precursor to further declines, with a bearish picture remaining in play unless we see a break through 25,716.
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