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Levels to watch: FTSE, DAX and Dow

Are the small overnight bounces just a pause, or a firm rebound?

Chris Beauchamp ChrisB_IG
Chief Market Analyst, London

Publication date : 2017-05-18T09:07:24+0100

New York Stock Exchange

Source: Bloomberg

FTSE 100 bouncing about to end?

Those brave enough to buy the dip yesterday have enjoyed a good bounce, but that may be coming to an end now. The FTSE made a new lower low yesterday, at 7424, and now we look to see how the bounce back to 7480 plays out.

A turn lower from here gives us a selling opportunity, as part of broader equity weakness. We also saw something of a double top yesterday on the hourly chart, around 7535, so the bearish signals are stacking up. Downside support lies around 7409, and then on to 7360 and 7260.

FTSE chart

FTSE chart

FTSE chart

DAX needs caution

An overnight bounce at the DAX has developed as expected, but we now look to see how the rally fares as it approaches previous support at 12,660.

A failure to push back above here would indicate that the sellers are still in charge, and so we will see how the downside case fares as the index heads towards 12,517 and then 12,408. It is too early to say whether this is the beginning of a sustained drop, so caution is probably the watchword for now.

DAX chart

DAX chart

DAX chart

Dow saved by the buyers after a nosedive

The index’s nosedive yesterday took it back to 20,600, whereupon it found buyers, who potentially were given further confidence by the fact that the Dow Jones ran slap bang into the rising trendline from the January lows.

This held in mid-April, and so is a warning to those looking to get overly bearish. A 43-point bounce seems too small given what we are seeing elsewhere, but as long as the index does not reclaim 20,846, we could easily have the makings of a bigger move lower. Below 20,600 the index targets 20,392, and then 20,140.

Dow Jones chart

Dow Jones chart

Dow Jones chart

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. 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. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Clients can lose more than they deposit. All trading involves risk.

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