Levels to watch: FTSE, DAX and Dow

It has been a lacklustre open to the session so far this morning, but overall yesterday’s strong day for indices restored the bullish outlook.

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Source: Blommberg

FTSE looks toward 6900

Admittedly it has not been the most exciting week so far in the FTSE 100. However, with the index off the lows of last week and continuing to hold above the 50-day simple moving average (SMA) 6870, the likelihood is that we will see it move higher. The 6900 level is proving to be something of a stumbling block for now, but a close above here would give the bulls the confirmation that they need.

Unlike other indices, the relative strength index (RSI) and stochastics have yet to register bullish crossovers, so caution is advised until they do. The first target is still 6960, followed on by the 7000 area. A move below the 50-day SMA would reverse the current bullish trajectory.

DAX eyes all-time highs

A strong move yesterday meant that the steady downtrend line from the index's March highs was finally broken, putting the bulls back in charge. If we see consolidation of this move today, the first target will be the all-time highs around 12,220. A bullish crossover has taken place on the daily stochastic momentum index, confirming the bullish move on the RSI we saw yesterday.

Given the steady buying pressure we have seen around 11,800, only a close below here would cancel out the scenario of fresh all-time highs.

Dow could reach 18,200

Although the index failed to hold 18,000 yesterday, the bounce off the October uptrend line still holds. The Dow finds itself back above the 20-day SMA (17,911), and if nothing else, this alone would suffice to show that the default setting here should be bullish rather than bearish.

The Dow has also seen a bullish crossover on the stochastic index, so assuming the upward momentum holds the first target is last week’s high around 18,200. A move down would test support from the past three weeks around 17,650, and a close below here would signal that the sellers are back on top.

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