In this article, we will take a look at the technical analysis of the most important stock market indices to get a picture of the possible risk-off sentiment which we can see looking at the safe haven currencies.
S&P500 has been rejected recently many times from a 2730 level, and a weekly chart is revealing the two doji candles below this level. There is irregular wedge formed with the crucial 2630-2650 zone. This zone needs to be broken to the downside for a break of the multi-month uptrend. Technically things are not so clear in the US markets.
The DAX seems to be forming a massive H&S formation by breaking below the 13000 level again. A break below this level is opening a downside extension into the 12600 level as long as the instruments hold below 13050 level. A break below the 12860 level will confirm the complete downside reversal.
The much clearer bearish structure has the Nikkei. The instrument is rejected by the 76.4% Fibonacci retracement of the latest swing up and is testing the 34 and 55 WMA support 220 level. Any daily close below this level would lead to an extended downside into the 200 level.
FTSE is rejected by the upper wedge line 7900 level and we are seeing a strong rejection candle which could lead to downside extension into the 7400 level if we see a daily close below the 7680.
By looking at the daily chart FTSE seems to be a stock market index with the biggest downside potential and a possible drop of 400 points all the way down to 7300 with a confirmed daily close below the 7680 level.
We have used the combination of the top-down trading analysis to get this key levels explained on the charts. Stock indices across the world are reversing the uptrend and the latest upside swings. We could expect a further risk-off sentiment in the market as long as the indices are below the ceratin recent highs. We could have an indication of that in the currency markets by the latest JPY and CHF strengthening.
Happy trading! (click on the chart to enlarge it)
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