Levels to watch: FTSE, DAX and Dow

The selloff in equity markets is starting to look a bit ugly at this point. Poor economic data, a less-than-optimistic International Monetary Fund outlook and the Ebola fears have acted as catalysts for additional moves to the downside.

Data reflected on a screen as man walks past
Source: Bloomberg

We also have the Federal Open Market Committee minutes later this evening which is adding to the uncertainty in the risky asset classes.

FTSE could reach 6315

Yes, that’s a death cross. The 50-day moving average has crossed the 200-DMA from above. Bear in mind this is a lagging indicator, something which is patently clear given that the FTSE 100 is already almost 7% from the highs. 

We are now approaching the major trendline support and the recent lows at the 6423 level where we may well see a bounce. A close below the 6400 market could take us rapidly towards 6315.

The index would need to break back through 6500 to stem this bearish outlook in the intraday.

DAX neckline at 8910

The DAX has slipped below the 9000 level in early trade reaching a low of 8993. We may see the index bounce around this level as stops and new orders are triggered. The potential head and shoulders is still the area to watch, with the neckline at 8910.

We are witnessing a slight degree of positive divergence on the hourly relative strength index which could let the market take a breather and potentially bounce back towards the 76.4% retracement of the moves from the 8 August lows to the recent highs.

Any attempt to retrace towards 9140 should be viewed as an opportunity.

Dow RSI not oversold

The current level of 16,710 has been an area of support, with the market finding a base here last week. So, a move through last week’s lows at 16,670 here, especially a daily close, would be a signal. The Dow Jones would then be set for a move towards the 200-DMA at 16,595. This has been a decent buying area over the recent past and it coincides with the trendline support from the October 2013 lows.

The slope of the 200-DMA has flattened also, which adds to the bearish scenario and the daily RSI is not oversold. Upside resistance lies at 16740-50. 

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