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Levels to watch: FTSE 100, DAX and Dow

A rebound for European and US stock markets has brought relief within a recent downtrend. However, with the DAX and Dow downtrends remaining intact, the sell-off may not be over yet.

FTSE 100 rises through resistance

FTSE 100 has been gaining ground this week, with the index passing through a crucial resistance point to bring about a more bullish outlook going forward. The rise through 7286 signals an end to the trend of lower highs that has been in play over the course of the past three weeks, raising the likeliness of a long-lasting recovery for the index.

With that in mind, further gains remain a distinct possibility, with a drop below 7222 required to negate this short-term ascendance. However, it is worth noting that the decline of the pound has been a key driver of the FTSE 100 outperformance, with the bearish picture for the DAX and Dow Jones highlighting that we are not out of the woods yet for the overall stock market outlook.

DAX rebounds into 76.4% resistance

DAX has also gained ground following a rally from key swing low support at 11,824. The trend of lower highs remains in tact for now, with the price having moved into the 76.4% Fibonacci resistance level at 12,118.

A break through the 12,212 swing high would negate the bearish trend and it is worthwhile looking out for whether we reverse lower or push through this resistance point as a determinant of forthcoming price action. Given the bearish shift in momentum as seen through the stochastic oscillator, it makes sense to watch out for downside for the near term.

Dow turning lower from 61.8% retracement

Dow Jones is another market which has been showing weakness at a key resistance level, with the index turning lower from the 61.8% Fibonacci level overnight.

The wider bearish trend remains intact for now, with a break through 26,019 required to bring about a more bullish view. For the short term, further downside looks likely with the oversold stochastic highlighting the potential for a bearish turn from here.

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.

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