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Levels to watch: FTSE 100, DAX and Dow

US markets are expected to lead the way higher once more, with European markets looking likely to weaken if key levels are broken.

FTSE 100 reverses into crucial breakdown level

The FTSE 100 has turned lower yet again following a rally into the 76.4% region. The 7445 low that has so far capped today’s downside is going to be absolutely crucial for the ongoing outlook.

A break below that level, which coincides with the 200-day simple moving average (SMA), would complete a head and shoulders formation for the index, bringing further downside. As such, watch for a break below 7445 for a bearish outlook, while a rally through the recent 7530 peak would bring about a more bullish short-term view.

DAX breaking lower from consolidation phase

The DAX is similarly attempting to break lower following a phase of consolidation amid yesterday’s German bank holiday.

The 12,201 level is crucial as a breakdown point, with the current attempt to break lower pointing towards a possible sell-off from here. Until then, we remain within consolidation mode.

Dow pullback to bring buying opportunity

The Dow Jones has been drifting lower, following on from the record highs seen yesterday. This is likely to simply provide us with a better buying opportunity, with a break below 26,332 required to negate the wider uptrend. The choice of swing low for your Fibonacci can be difficult on this one.

Therefore, while there is a possibility of utilising the 26,538 level to base your stop loss on, the fact is that 26,332 is ultimately the key level that must be broken to negate this bullish outlook.

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