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Levels to watch: FTSE 100, DAX and Dow

Recent market declines have been recovered to a large extent, yet with technical and fundamental signs of weakness remaining, we could see further downside to come

FTSE 100 recovery moves back into Fibonacci territory

The FTSE 100 has been regaining ground since the sharp drop seen off the back of the weekend’s news of a breakdown in US-China relations.

However, with the index on the rise again, we can see that there is a strong chance we are simply trading within another bearish retracement phase. With that in mind, watch for a potential turn lower in the near future, with a rise through 7418 required to negate that notion.

DAX rally could be short-lived

DAX has a similar picture, with recent gains bringing us back into the 61.8% retracement.

The ability to push on through the 12,465 level is key to resuming the upward trend. However, given the recent breakdown through levels such as 12,236 and 12,181, another leg lower looks likely for this index. A break back below the 12,236 swing low seen overnight would provide us with a signal that such further downside is about to take hold.

Dow rallies back into trendline resistance

Dow Jones saw the largest sell-off of the three on Monday, with a huge 2% fall taking place over the early hours of trade.

However, much of that move has now been recovered, with the weekend gap closed. Despite this, much in the same way that the US-China issue has not been resolved (tariffs expected on Friday), this rebound has simply taken us back to trendline resistance that could spark the next leg lower for this market. Thus, a bearish view is in place, with a rise through 26,543 required to negate the likeliness of a bearish shift.

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