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Levels to watch: FTSE, DAX and Dow

While European and US indices drift lower this morning, there is a clear preference for Dow gains over the more convoluted FTSE and DAX picture.

anonymous

Publication date : 2017-07-18T09:36:43+0100

German stock exchange

Source: Bloomberg

FTSE breaking lower once more

The FTSE is selling off into yesterday’s low of 7361, which if surpassed will provide us with a lower low to accompany yesterday’s lower high. The difficulty here is knowing which way we are heading over the short term. On one side this could be the beginning of another move lower on the wider timeframe and thus a break back below 7304. Or else we could be looking at another period of consolidation before we break higher once more (like that seen earlier this month).

Given the current weakness, it brings the possibility of a deep retracement long from around the 7336-7345 range into play. However, we will ultimately need to see a break through 7452 to bring about a wider bullish outlook.

FTSE chart

FTSE chart

FTSE chart

DAX breaks below trendline support

The DAX has broken through trendline support this morning, following on from a rally into the 76.4% retracement. This market looks more bearish given the clear creation of lower highs and lower lows. This necessitates a break back above 12,735 to become bullish once more.

With that in mind, further downside looks likely. However, given the extended nature of the recent decline (stochastic at three-week low), we could see a bounce from the key 12,490 support over the short term.

DAX chart

DAX chart

DAX chart

Dow wedge points to break higher

The Dow Jones continues to look likely to outperform its European counterparts, with the recent decline coming within a very clear uptrend. This means that the current weakness is perceived as a short-term phenomenon before we break higher once more. Recent price action appears to be forming a bullish falling wedge.

With that in mind, longs are preferred, with a deeper pullback being beneficial for risk-to-reward purposes. A break below 21,524 would negate this.

Dow Jones chart

Dow Jones chart

Dow Jones chart

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa 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. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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