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Levels to watch: FTSE 100, DAX and Dow

European and US indices are moving higher after their recent pullback. However, while these indices are gaining ground, there is still a significant risk of a bearish turn in the near future.

FTSE 100 rallies into Fibonacci resistance

The FTSE 100 has managed to rally back towards the crucial 7196 resistance level over the past two days. The ability to break through that 7196 level is going to be crucial in determining where we go from here.

We are currently seeing the index respect the 76.4% retracement level, and thus traders should be aware that we could start seeing a bearish shift unless we do manage to break through 7196.

DAX rebounds unlikely to last

The DAX has been turning higher since Friday’s low, with the index recovering a large chunk of last week’s losses.

However, with the index having broken below the key 11,047 and 11,004 swing lows, this rally is unlikely to last. Instead, this rally looks like a good shorting opportunity, with shorts preferred within the 11,187-11,264 zone (61.8% and 76.4% retracement). A break through the 11,389 level would negate this bearish outlook.

Dow regaining ground after recent pullback

The Dow Jones is slowly gaining ground following a period of weakness that took the index close to the crucial 24,835 swing low.

While we did not break below that level to bring a more bearish outlook, the gradual nature of this ascent does raise questions over whether the index will have enough impetus to break up through the 25,439 high. As such, watch for a break below the 25,002 level to bring a more bearish view, with the gradual move higher likely to continue until unless we see that bearish shift. A rally through 25,439 would be needed to bring greater confidence that this uptrend is set to continue.

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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