Levels to watch: FTSE, DAX and Dow

Indices catch a brief reprieve, yet warnings signs are there for another leg lower.

A man looking at data on a screen
Source: Bloomberg

FTSE selloff hits the buffers but questions remain

Overnight price action has brought about a recovery of sorts from the 6649 low posted yesterday. The ability to hold up above this cluster of support levels (6691, 6672, 6649 and 6624) is crucial as a move below could spell out something more significant in this current pullback.

The price is currently attempting to break lower once more, and thus the ability to create a new higher low and not move below 6649 is absolutely crucial. Given the bearish flag formation we are seeing, I do expect further losses, especially if we see a move below 6649. However, should the price begin to be bought up before that point, it could be a good sign that the worst is over.

A move back above 6715 for the index would likely point towards a return to the 6727 and 6808 resistance points.

DAX flag breaking down into further losses

The DAX has also caught a bid overnight, which formed a flag formation of sorts. However, the price is now trying to break down from this pattern, pointing towards a move back below 11,484.

Things do not look so critical for the DAX, given the bullish outlook provided by the descending channel breakout earlier in the month. As long as the price remains above that channel top (currently 11,300), it still looks bullish. The same rule applies to the DAX as the FTSE, with a move below 11,486 pointing towards further losses, whereas a move back above 11,624 looks like we could see a return to 11,800 in the near term.

Dow Jones reprieve brings price into key resistance level

The Dow has also managed to pull itself back overnight, following a very sharp selloff earlier in the week. However, this has brought us to a major resistance point, at 17,914. That level represents a key point of reversal in the past and also yesterday’s resistance point.

As such, given the flag breakdowns we are seeing in the FTSE and DAX, accompanied by the existence of a key resistance point here, I would expect to see some selling come into play here for a move back down towards the 17,805 level. A rise above 17,914 would bring about a greater chance of a recovery.

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