Levels to watch: FTSE 100, DAX and Dow

Yesterday’s breakdown for global indices has put the likes of the FTSE 100, DAX and Dow into a precarious position. With the down seemingly leading the bearish charge, further downside is looking increasingly likely for the indices.

FTSE 100 showing signs of wider breakdown

The FTSE 100 tumbled below the 7535 support level yesterday, pointing towards the possible beginning of a next period of weakness. The subsequent rally back into that 7535 level has been fleeting, with the respect of that previous support as new resistance pointing towards the potential for further downside.

Crucially, with yesterday’s fall below 7489, we saw a new three-month low for the index, and that may not be the end. A continued breakdown from here would move us out of a period of consolidation that has lasted two months, and instead take us into the next leg lower for the index. Until then, there is still a chance we will rebound to continue that two-month range.

DAX trading around crucial breakdown level

The DAX has similarly broken into a critical support level, with the fall below trendline and Fibonacci support pointing towards a potential wider breakdown from here.

The ability or inability to break and hold below 12,102 is going to dictate the state of play from here. With that in mind, watch for a break or rebound from that level to signal where we go from here.

Dow rebound gives shorting opportunity

The Dow Jones sold off sharply below the critical 25,114 level yesterday, with that move pointing towards further downside to come. With the price having rebounded since, there is a good chance that we are about to see another leg lower for the index.

With that in mind, this looks like a good opportunity to look for shorts, with a rally through 25,342 going some way to negate the bearish view. Ultimately it will come down to whether we break the 25,700 high. However, there is a strong chance we will respect this swing high and turn lower from here.   

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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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