FTSE 100, DAX and Dow expected to decline despite short-term rebound
FTSE 100, DAX and Dow gain ground overnight, yet recent declines point towards market tops coming in play once again.
FTSE 100 rebounds into 76.4% resistance after sell-off
The FTSE 100 saw sharp declines throughout yesterday's session, with the index ultimately dropping back into the critical 5338 support level. This move looks to build on the breakdown from higher lows seen last Friday.
With the price having turned down from the 76.4% Fibonacci resistance level at 5712, a break below the 5338 low would have pointed towards a reversal coming into play as the price seeks to reverse the gains seen in the final days of March. Nevertheless, the overnight rally has taken us into a shorter-term Fibonacci resistance level, with the 76.4% level at 5475 now worth watching. As long as the price remains below the 5517 swing high, this rebound could be capped for another bearish move back towards the 5340 support level. Thus the short-term outlooks will be determined by whether we break below 5340 or above 5517. In either case, there is a good chance the index is priming itself for another major move lower.
DAX rises after brief double top completion
The DAX managed to break below the double top neckline of 9373 yesterday, with the index looking likely to have formed a top. Given that this looks like a market reversal playing out, there is a chance we could see short-term upside as markets realign back into a more bearish view.
Once again we are seeing 76.4% Fibonacci support (9549), with the index needing a break through 9620 to bring about a potential extension to this short-term rebound. Until that happens, there is a good chance we break lower from here, with the stochastic oscillator moving into oversold territory.
Dow Jones double top points towards further downside
The Dow Jones managed to complete a double top formation yesterday, with the index breaking below the critical 21,145 support level. This points towards a likely end to the recent recovery, with further downside likely before long.
Whether that will come immediately remains to be seen, with the price rallying overnight. That move has taken the index into the 61.8% Fibonacci retracement level. A break through the 21,490 resistance level would signal a likely extended rebound coming into play. Conversely, this deep retracement could provide us with a good shorting opportunity if we start to reverse lower from this 61.8%-76.4% Fibonacci zone. For those seeking out a technical sell signal, watch for a break back below the 80 level in the stochastic, with the indicator likely to rise into overbought territory today.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. 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.
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