FTSE 100, DAX 40 and Nasdaq Stabilize in Cautious Trading

Written by Axel Rudolph, Senior Market Analyst at IG

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FTSE 100 capped by resistance

Last week’s FTSE 100 gains, driven by large cap energy stocks, faltered at Thursday’s 7,687 high amid heightened Middle East tensions and an uptick in US inflation with the index slipping back below the 200-day simple moving average (SMA) at 7,650. This is expected to act as resistance on Monday.

Further consolidation below Thursday’s high at 7,687 is expected to take place over the coming days. If a slip through Friday’s low at 7,591 were to ensue, support between the 7,562 early July high and the 7,550 11 September high may come into play.

Last week’s high at 7,687 ties in with the mid-June high at 7,688. Further up lie the July and September highs at 7,723 to 7,747.

DAX 40 stabilizes above Friday’s low

The DAX 40, which on Friday fell out of bed in anticipation of an Israeli ground invasion of the northern Gaza strip over the weekend, stabilizes above Friday’s 15,108 low as those events haven’t as yet materialized.

A fall through 15,108 could put the early October low at 14,944 back on the map, though.

As long as 15,108 underpins, the 6 October high at 15,296 may well be revisited. Above it lies the major 15,455 to 15,575 resistance area which encompasses the July to mid-September lows and last week’s high.

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Nasdaq 100 short-term topped out

The Nasdaq 100 saw two consecutive days of losses following a slightly higher inflation reading in the US last Thursday which increased the odds of another Fed rate hike being seen to 40%. Rising US treasury yields on fears of an escalation in the Middle East have also pushed the index lower despite major US banks on Friday reporting lower loan loss provisions than had previously been anticipated as the US Q3 earnings season kicked off in earnest.

The Nasdaq 100 on Friday fell to 14,939, a level above which it will try to remain today with the 55-day simple moving average (SMA) at 15,102 being eyed. Further up lie the 15,135 early September low and Friday’s high at 15,239 which could also act as resistance, if reached at all that is.

Were Friday’s low at 14,939 to give way, the late September high at 14,905 would be targeted. Much further down lies major support at 14,521 to 14,430, the 27 September to 9 October lows.