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Levels to watch: FTSE 100, DAX and S&P 500

A sharp sell-off has led European and US markets into key support levels. However, this brings about questions over whether this marks the beginning of a more protracted move lower.

IG Analyst

Publication date : 2017-10-19T10:09:49+0100

Chart

Source: Bloomberg

FTSE 100 falls back into key support

The FTSE 100 is back at the 7485 support level this morning, as the market broke below the consolidation seen throughout much of the week. The ability to break this level will be key as a bearish signal, with a substantial amount of ground to the downside without notable support.

However, until then we are seeing a bounce, and so it is worthwhile watching to see if the previous support zone around 7516 holds as new resistance. Given this move lower, it makes sense to look for further downside, with a break above 7541 required to negate this view.

FTSE 100 chart

FTSE 100 chart

FTSE 100 chart

DAX breaks trendline support

The DAX has sold-off sharply this morning, with the price breaking below 13,000 and trendline support. Crucially, the market has managed to find a bid around the key swing low of 12,907. That level would be critical in determining if we are set for further downside.

Given that we have now set a flat bottom on this wider timeframe, this market has an increased (yet unconfirmed) chance for rolling over. With that in mind, there is a good chance we could see further downside. Ultimately, the directional bias will be determined by a move below 12,907, or above 13,061.

DAX chart

DAX chart

DAX chart

S&P 500 tumbles out of wedge formation

The S&P 500 has fulfilled its bearish wedge pattern, with a sharp move lower coming after the price fell below trendline, and simple moving average (SMA) support. The next notable support level comes at 2541, below which a bearish wider view comes into play.

Until then, there is a good chance we could see the price regain composure throughout the day. Because of this, it makes sense to watch this market on a shorter-term intraday basis, with the formation of bullish reversal or bearish continuation patterns pointing the way for the day.

US 500 chart

US 500 chart

US 500 chart

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