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Levels to watch: FTSE 100, DAX and Dow

European and US markets have been drifting lower at the start of the week, with questions arising over whether this is a retracement or a reversal.

FTSE 100 drifts lower from Fibonacci resistance

The FTSE 100 has been moving lower after hitting the 76.4% resistance level which capped the price action just over a week ago.The gradual nature of this move points towards a potential retracement in play here, with a break below 6798 required to bring about a wider bearish outlook.

However, while another move lower looks likely over the short term, we need to see a break through the 6983 swing high to point towards a potential rally through that 7000 mark and onwards.

DAX weakening after recent rally

The DAX saw a similar surge into the 76.4% retracement, with the index turning lower in response. The uptrend seen throughout 2019 thus far points towards this current move lower forming a retracement before we move higher once more.

However, the wider bearish trend still holds, with the respect of the 76.4% retracement highlighting the possibility that markets see value in that wider trend. As such, we should watch to see if we can maintain this bearish price action below the 76.4% resistance level, with a break above there pointing towards a potential move into the crucial 11,570 breakout level.

Dow hesitation could provide bullish set-up

The Dow Jones has been drifting lower overnight, coming off the back of a recent rally for the index.

The uptrend remains intact unless we see the price break below 23,726, and thus there could be another leg higher before long. The key to such a move higher would be a rally through the 24,668 resistance level. Until then, there is still a chance for the index to drift lower over the short term.

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