Levels to watch: FTSE 100, DAX and Dow

Global markets have been declining sharply, yet with both European and US markets showing some signs of life, we could see near-term gains before markets turn lower again.

FTSE 100 stabilises after declines

The FTSE 100 saw another sharp decline yesterday, with the index following through on the breakdown below 7219 support. The indecision candles currently forming point towards the possibility of an upward retracement over the short term.

However, we are looking increasingly likely to see the beginning of a wider downturn, with another leg lower looking likely unless the price breaks through the 7243 swing high.

DAX breaks below key support level to continue bearish trend

The DAX managed to break below 11,866 support yesterday, bringing confirmation that this bearish trend remains in play. Given the steep decline yesterday, this morning will likely reverse some of that. Therefore, there's a good chance the gains we are seeing thus far will persist.

However, we would need to see a break above 12,008 to negate the short-term bearish trend. So, until that happens, further downside looks likely.

Dow breaks down after head and shoulders pattern

The Dow Jones managed to break lower, following a short period of sideways consolidation. That formed the second shoulder within a head and shoulders pattern, driving a sharp sell-off for the index.

In a similar manner to the FTSE 100 and DAX, the market is likely to begin regaining ground from here, if only to retrace a portion of yesterday’s decline. However, there is a strong chance that this is part of a wider decline for the index.

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