Levels to watch: FTSE, DAX and Dow

Markets ended yesterday firmly off the lows, but where is the next move?

Screen of data
Source: Bloomberg

The never-ending clash between bulls and bears seems much more finely-poised at present than it has done for some weeks. Wednesday’s price action is still making its presence felt, but ahead of the month and quarter end there is still some buying pressure, as seen in Europe yesterday.

FTSE could reach March lows

The index finds itself battling to hold above the 20-day SMA, having dipped below here yesterday. Further support is possible around the 50-DSMA, while beyond this the 6800 level comes into play. With the daily relative strength index and stochastic momentum index still bearish however the sellers may remain in control.

A close below the 50-DSMA would certainly signal fresh weakness ahead, potentially taking us all the way back to the 200-DSMA/6700, the lows of March.

DAX's RSI bearish

European markets continue to impress by their resilience, and this morning is no exception. We find ourselves some 300 points off yesterday’s low, so even if, like the FTSE 100, the DAX finds itself saddled with bearish RSI and stochastic readings, there is still an evident desire to keep this market above key support at 11,800.

A dip below the 20-DSMA was rapidly bought, so this indicator is one to watch in coming sessions. However on the four-hour chart the steady downtrend from the March (and indeed all-time) highs has yet to be broken. Resistance may be found around 11,960, but a daily close above here would suggest that month-end strength will push this market back up. On either side of the trade, caution is a prudent strategy.

Dow battles to stay above 17,700

The industrials index is fighting hard to stay above 17,700. While a move below here would not necessarily signal real weakness is on its way, it will cause some to worry. Rising support off the October lows, intersecting with the low at the beginning of February, could stem the downward move, so traders should watch the 17,650 area.

Like the FTSE 100 and the DAX, daily momentum indicators such as the RSI are still in a bearish mode, which could see the week end on a downbeat note. The month lows around 17,600 have yet to be broken on a daily close basis, so this is the area to watch for now. 

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