Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Levels to watch: FTSE 100, DAX and S&P 500

European markets are showing some signs of a possible pullback, with the FTSE 100 breaking below trendline support and the DAX testing key swing low support.

FTSE 100 breaks below trendline support

The FTSE 100 managed to break below trendline support yesterday, with overnight consolidation providing a heightened chance of a shift lower from here. On previous occasions when the index broke into the bottom of the Bollinger band, we have seen the price turn higher soon after.

As such, with the price now trading near the bottom band, a sharp move lower and close below the bottom band would go a long way to signaling a bearish reversal signal. Until then, there is still a chance we could rebound from Bollinger support.

DAX trading at critical support level

The DAX has turned lower from a confluence of an inside trendline and 76.4% Fibonacci retracement, leading to a significant drop yesterday. However, this has brought us into a crucial support zone, with the low of the day coming at the middle Bollinger band 20-day simple moving average (SMA) and ascending trendline.

More importantly, this is also the prior swing low of 12,916, which must be broken to provide a bearish outlook for the coming week. As such, the ability or inability to break below 12,916 will be a key determinant of DAX sentiment going forward.

S&P 500 range-bound following key upside break

The S&P 500 index has been trading within the 2701-2742 range over the past two weeks. This consolidation follows an important break above the 2718 high from late April. Given that break through 2718, there is a good chance the ultimate break from this pattern will be bullish.

However, with both the FTSE 100 and DAX showing some signs of potentially rolling over, it makes sense to await a break from this range to signal market direction from here on in.

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.

Find articles by writer