Levels to watch: FTSE, DAX and Dow

Other than the knee-jerk reaction one can expect from financial markets, the conclusion of QE was met with reasonable acceptance.

A chart
Source: Bloomberg

Once again the appearance of ‘considerable time’ was used and while this would normally be construed as dovish, there was the data dependence caveat.

Essentially, if unemployment and inflation expectations change – rates could go up within a considerable time rather than after a considerable time.

Either way, the prop that is monthly bond buying is essentially no longer there – it looks like we can finally start to depend on fundamentals for direction. US advance GDP later this afternoon will certainly pique investor interest, and any failure to meet expectations for a quarterly rise of 3% will not bode well for equity indices.

FTSE trading flatly

The weaker metal prices are weighing on the mining sector this morning and the FTSE is finding the going tough establishing any move through the 6485 level, and is for now trading fairly flat on the week. The trendline resistance from the March lows remains the barrier to upside and technically coincides with the 50% retracement from the highs of September 19 to the recent lows just above the 6000 marker.

The hourly chart indicates that the uptrend from the 6070 lows has been punctured, with price action also falling through the 50-hour MA but finding support at the 100-hour MA. Any break below 6400 would target  6380 (200-hour MA) with the 6340-50 level coming in below that.

A move through the 6487 level would put the index on a move towards 6560.

DAX could head towards 50-DMA

The 9120 level is an area that the DAX has yet to see a daily close above. The 50% retracement from the 19 September highs to the lows at 8350 also comes in at this point, and although we have seen the level tested in the intraday a daily close would support the bullish scenario and see the index reach for the 50-day moving average at 9320.

The hourly chart sees price action also testing the 100-hour MA at 9030, so this would need to hold if the DAX is to avoid a run below the key psychological level that is 9000.

Below this lies the 200-hour MA at 8955 then 8850.

A move through 9160 (yesterday’s highs) would see 9240 tackled.

Dow supported by 50-hour MA 

With the US index it is the 76.4% retracement from the recent lows to the highs that stands in the way between current levels and the all-time high at 17,365.

Decent support is being gleaned from the confluence of the 50- and 100-DMA, but the 17,000 level remains contentious with the Dow Jones failing to show a daily close above this level since the recent selloff.

Clearly a daily close would be bullish and could see the Dow move towards the 17,150 level in short order. The 50-hour MA is lending support for now. A fall through here would see a return to 16,917 and could bring about a short-term double top pattern. This, in alliance with the negative hourly relative strength index, suggests that a breach of 16,900 could see the Dow fall some 100+ points.

The 100-hour MA would be expected to provide some type of floor however, it arrives at 16,880.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.