Levels to watch: FTSE 100, DAX and Dow

European and US indices have been showing signs of weakness, and with the likes of the FTSE 100 and DAX approaching crucial support levels, there is a growing chance we could see the price break to the downside.

Source: Bloomberg

FTSE 100 rebounds from range support

The FTSE 100 managed to rally sharply from the crucial 7543 support level yesterday. That has largely capped any move to the downside of late, with the subsequent rally respecting our previous support level of 7632 as new resistance.

The big question is whether we are going to continue to respect this range. With the index turning lower, watch out for a possible failure to break below that 7543 level to signal the beginning of a bullish phase to take us back into the top of the range. A break below 7543 would point towards a move back into 7489 as the next support level.

DAX approaches key bearish threshold

The DAX has continued its descent, with the price moving within reach of the 12,464 support level.

A break below there would largely signal the end of the recent uptrend and instead bring us back into a more bearish short-term position. As such, the ability or inability to break this level will greatly determine where we go from here.

Dow rally could be short-lived

The Dow Jones has been regaining ground, following a fall into an area between the 61.8% and 76.4% retracement levels.

That inability to respect any of the Fibonacci levels could highlight the possibility that this is not a retracement and thus a break below 24,930 is more likely. On the flip-side, the rebound we have seen has moved perfectly into the 61.8% retracement, with the price starting to turn lower. A break below 24,930 would be required to bring about a bearish outlook, yet the respect to see at certain Fibonacci retracements can often give us a clue about how the market is perceiving a particular move.

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