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FTSE 100, DAX and Dow gains could be short-lived

FTSE 100, DAX and Dow regain ground overnight, yet bears could come back in after the break below key support overnight.

FTSE 100 turning higher after overnight losses

The FTSE 100 saw sharp declines overnight, with the index breaking below the 6181 support level. That move provides a signal that we could be set for another turn lower despite the current rise.

With that in mind, the current rally looks like a potential retracement, with the 61.8%-76.4% Fibonacci zone (6246-6270) looking like the prime area for such a bearish reversal. A rise back through the 6308 level would negate this short-term view, bringing a bullish continuation signal to build on the gains seen throughout this week.

Looking back at this past week, each day has seen selling around the US open, following early gains in the European morning. If that were to happen again, we would be looking at this current rally to persist into the afternoon, with the index being at risk of an afternoon downturn.

DAX rallies into Fibonacci resistance

The DAX saw a similar breakdown below key support overnight, with the drop through the 12,217 level signalling the potential for another bearish phase for the index. With the price already at the 76.4% Fibonacci resistance level (12,369), we are already at a crucial crossroads where the index would have to start turning lower before long for the bearish picture to emerge.

Alternatively, a rise through the 12,433 level negates that bearish bias and point towards further upside to come.

Dow Jones regains ground, yet bears may not be far off

The Dow Jones declines seen throughout much of the US session has been eased overnight, with the index regaining ground as we move into European trade. However, those losses yesterday do point towards a potential turn lower once again, with the current rally looking like a bearish retracement given the drop below 26,079 and 25,802 overnight.

With that in mind, a bearish outlook is in place today, with a rally through the 26,631 level required to bring a more bullish outlook. Keep an eye out for Fibonacci resistance at 26,296 and 26,424 as potential reversal points.

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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