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Levels to watch: FTSE 100, DAX and Dow

Friday’s sharp sell-off has raised the chance of further downside for the indices, yet given the size of that downward move, could we see a short-term rebound?

FTSE 100 tumbles into deep retracement

Growth concerns saw indices come off sharply towards the end of last week, with the FTSE 100 breaking into a crucial zone of Fibonacci support. The price has moved into the area between the 61.8% retracement of the 7039-7371 move, and 76.4% retracement of the 7076-7371 rally.

There is a good chance that we will soon see this index turn higher, with this sell-off looking like a good buying opportunity as long as we do not see a break below the 7076 support level. However, with the DAX and Dow looking more at risk, it is worth being aware that such outperformance in the FTSE 100 would likely require a weakening pound.

DAX turning higher after recent downturn

The DAX is starting to find some buyers, following on from a sharp decline on Friday. The drop below 11,401 points towards a likely bearish move coming back into play before long.

However, with a bullish engulfing pattern potentially forming this morning, we could see a rebound over the short term. A break below 11,269 would signal a likely continuation of the recent bearish trend. Watch for a possible rally out of this falling wedge on the stochastic oscillator to add further confidence of an impending bullish phase.

Dow sell-off brings the price closer to key support level

The Dow Jones has tumbled into a two-week low, with the index approaching the crucial 25,216 support level.

There is a good chance that we will soon see another rebound, even if that move is a retracement of Friday’s sell-off. Ultimately, we would need to see a break above 26,011 to bring a wider bullish picture back into play. Meanwhile, a break below 25,216 would confirm a potential wider top being in place for the Dow.

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