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FTSE 100, DAX and Dow expected to reverse lower

​​FTSE 100, DAX and Dow look primed for another turn lower following a bout of upside overnight.

FTSE 100 rebound provides selling opportunity

The FTSE 100 has been regaining ground overnight, with the index rising into the 61.8% Fibonacci retracement level. With global fiscal stimulus measures and bans on short selling helping improve sentiment somewhat, we could be moving into a phase where selling is punctuated by more frequent periods of upside.

However, the downtrend remains in play and thus it makes sense to look for another leg lower from here. With that in mind, a bearish turn lower is expected from here, with a break through 5698 required to negate this view.

DAX rallies into area of resistance

The DAX has similarly managed to regain ground overnight, with the index now trading back around the 50% Fibonacci level.

A standard deviation channel highlights the fact that this move has taken us into relatively overextended levels, and thus the bears look likely to come back into play before long. The downtrend here is undoubtably consistent and will likely remain in play given the ongoing economic decline being seen globally. As such, short positions are preferred here, with a break through the 10,004 level required to negate this downtrend.

Dow Jones rebound unlikely to last

The Dow Jones has seen the shallowest retracement of the three, with the rise only bringing us to the 38.2% level. This could point towards further short-term upside, with the limit-up rules halting the price action for now.

However, we are once again looking at a very reliable downtrend. With that in mind, further weakness is likely to be around the corner, with a break through 23,170 required to negate this bearish outlook. For those wanting a sell signal, watch the hourly stochastic for a breakdown below the 80 level to highlight a reversal in momentum.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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