FTSE 100, DAX and Dow could retrace after recent gains

FTSE 100 upside proving short-lived after sharp decline yesterday

The FTSE 100 fell sharply into the 7473-7484 support zone yesterday, pointing towards the possibility of a wider breakdown should the index fall back below that 7473 low.

With the index currently on track to form a bearish engulfing pattern, we could see another challenge of that zone. The short-term outlook will be determined by whether that level is broken or not. Should that occur, we will be looking at a potential decline into the 76.4% retracement at 7430.

DAX starts to ease after sharp gains

The DAX has clearly outperformed its UK counterpart, with the index rallying sharply throughout the week.

We are looking at a potential bearish engulfing pattern with this current candle, pointing towards the potential for a short-term pullback. However, should that happen we would be looking at it as a retracement phase where a wider bearish picture only comes into play in event that the index declines below 12,465.

Dow continues to trade within consolidation zone

The Dow Jones has been trading within a consolidation phase over the course of the past fortnight, with the price attempting to gain ground overnight.

That rally has failed to break through 27,370, and there is a chance we will continue to consolidate rather than break out of this phase. Certainly, a break below 27,187 would raise the likeliness of a continued directionless consolidation phase. However, if we break through the 27,370 level, it would point towards a possible bullish breakout and exit from this two-week phase.