FTSE, DAX and Dow showing signs of topping out

FTSE 100 rises to six-week high

The FTSE 100 has been a notable outperformer in a week that has seen equity markets find themselves under pressure.

A potential stochastic breakdown through the 80 threshold failed to materialise given yesterday’s pop. Thus, the sell signal holds off for now.

This index does stand out as a major outlier thanks to the influence of FX markets, with internationally-focused stocks benefitting from sharp declines in GBP/USD, and a rising EUR/GBP.

Coming off the back of a historic rate hike from the Bank of England (BoE) and warnings of the longest recession in history, the pathway for the pound will be key for the FTSE 100.

While the index could rise further, this current rebound looks to be setting up a bearish reversal. Keep an eye out for a potential turn lower from the 61.8% to 76.4% Fibonacci zone (7244-7371).

DAX showing signs of having topped out

The DAX is attempting to regain lost ground today, coming off the back of a period that has seen a bearish engulfing pattern signal the potential for a market top.

Coming at the 76.4% Fibonacci resistance level (13465), there is a good chance this current rise is short-term in nature as momentum starts to reverse. Notably, the stochastic oscillator has broken through the 80 threshold, bringing a sell signal that has been historically very timely in nature.

From a data perspective, further warning signs of a German contraction have been provided by a six-month low in factory orders, which fell 4% in the month of September alone.

As such, another bearish turn looks likely before long, with a move up through the 13570 required to raise questions over the validity of this view.

Dow reverses from Fibonacci resistance

The Dow has been heading sharply higher over the course of October, but that appears to have come to a swift end in November, with the index turning sharply lower this week.

With the stochastic falling below the 80 threshold as price reverses lower from the 76.4% Fibonacci resistance level, there is a strong chance that we have topped out here.

Keep a close eye out for the jobs report this afternoon for any signs that the economy is on the turn. A bearish view holds unless price rises through the 34286 swing-high.