European Central Bank euphoria was bound to fade, leading to broad-based but so far modest declines.
Overall the situation looks less than encouraging this morning for equity bulls, although they can hardly complain given the strength and intensity of the rally seen, especially in Europe.
Europe is finally waking up from the post-ECB excitement, while the sheer volume of earnings scheduled this week from the US means that markets there are on the back foot too. Combine that with an upcoming Federal Open Market Committee meeting and it looks like the indecisiveness exhibited by US indices so far is likely to remain with us.
FTSE below 50-hour MA
The FTSE has eased back from its post-September high this morning, dropping out of overbought territory in the process. The index had looked overextended for some time, and now we look towards downside support at the 200-day moving average at 6680, followed by the rising uptrend off the December lows around 6600.
The index is dropping back below the 50-hour MA once more, although we may find support around the 100-hour MA at 6790. Below this the 200-hour has yet to be tested in the current rally.
DAX unable to maintain momentum
A small pullback from all-time highs is nothing to be overly concerned about, but it is noticeable that the DAX is failing to sustain the momentum of recent weeks.
Now we look to yesterday’s lows around 10,500, around the rising trend off the early January lows. The DAX is still overextended from its 50-DMA, which currently sits around 9900, with a lot of clear air below its current price.
For the moment the 50-hour MA has yet to be breached, but more meaningful support could be seen at the 100-hour, which was tested twice last week. Only time will tell if this is a ‘buy the dip’ moment or the beginning of a short-term pullback. The longer-term outlook however is still broadly bullish.
Dow RSI continues to fall
The Dow Jones has stalled just below the 50-DMA for two consecutive sessions and is well-off the 17,800 high of last week. The daily RSI is still dropping as well, sending a signal that the bounce here may have run its course too.
Crucially the hourly trend off the 16 January lows is under pressure once again. A break below here would be a bearish signal, but for now the 17,600 zone appears to be holding.