FTSE drops through 6800
The FTSE seems determined to snatch defeat from the jaws of victory, as it drops back through 6800.
The drop through the 50-day moving average leads us to suspect we will see a fall back to the 100-DMA around 6745, with a potential repeat of the June dive to 6700.
Short-term short positions may prove successful, but it would be unwise to get carried away, as a test towards 6730 would hit the rising trendline from the April lows. Only a loss of the 200-DMA would shift the position towards a bearish view, with an intermediate target of 6500.
DAX heading towards 50-DMA
The potential triple-top in the DAX has opened the way to fresh downside, with the index now heading towards the 50-DMA. A drop through here would suggest more losses, although 9800 worked well as support last week.
A declining relative strength index and a rolling over in moving average convergence divergence (MACD) and the stochastics indicate buying pressure has disappeared, but the rising trend from mid-March may yet see buyers return to the fray.
So long as the 50-DMA holds this is not a sellers’ market, but a drop through here would shift the view to a neutral one, with a summer drop to the 200-DMA always a possibility, engendered by low volumes.
Dow outlook still positive
Top callers were out in force for the Dow Jones after its 0.3% decline yesterday, but this index still looks more positive than others.
A drop through 17,000 would scare a few, but the 20-DMA provided excellent support in June, while the rising trend from the April lows would be the major line to look for, and a move towards here would mean we could see 16,850 without endangering the upward move.
Only a drop through 16,800 even remotely changes this view, but bears should remember that no dip has yet been too small to be bought – look to 11/12 June, when the Dow slumped over 200 points in two days before marching higher again.