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Levels to watch: FTSE, DAX and Dow

While European and US indices drift lower this morning, there is a clear preference for Dow gains over the more convoluted FTSE and DAX picture.

IG Analyst

Publication date : 2017-07-18T09:36:47+0100

German stock exchange

Source: Bloomberg

FTSE breaking lower once more

The FTSE is selling off into yesterday’s low of 7361, which if surpassed will provide us with a lower low to accompany yesterday’s lower high. The difficulty here is knowing which way we are heading over the short term. On one side this could be the beginning of another move lower on the wider timeframe and thus a break back below 7304. Or else we could be looking at another period of consolidation before we break higher once more (like that seen earlier this month).

Given the current weakness, it brings the possibility of a deep retracement long from around the 7336-7345 range into play. However, we will ultimately need to see a break through 7452 to bring about a wider bullish outlook.

FTSE chart

FTSE chart

FTSE chart

DAX breaks below trendline support

The DAX has broken through trendline support this morning, following on from a rally into the 76.4% retracement. This market looks more bearish given the clear creation of lower highs and lower lows. This necessitates a break back above 12,735 to become bullish once more.

With that in mind, further downside looks likely. However, given the extended nature of the recent decline (stochastic at three-week low), we could see a bounce from the key 12,490 support over the short term.

DAX chart

DAX chart

DAX chart

Dow wedge points to break higher

The Dow Jones continues to look likely to outperform its European counterparts, with the recent decline coming within a very clear uptrend. This means that the current weakness is perceived as a short-term phenomenon before we break higher once more. Recent price action appears to be forming a bullish falling wedge.

With that in mind, longs are preferred, with a deeper pullback being beneficial for risk-to-reward purposes. A break below 21,524 would negate this.

Dow Jones chart

Dow Jones chart

Dow Jones chart

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