Thursday, April 30, 2009

FTSE 100 Index Chart Pattern - Apr 29, 2009

It has been more than a month since I looked at the FTSE 100 index chart pattern. The index was looking weak compared to global indices and looked like forming a bearish 'rounding top' pattern that led me to infer that the up trend may be ending soon.

The global up-trend through Mar and Apr '09 has confounded a lot of experts, and just as the majority seemed to agree that it was a bear market rally that would end sooner than later, Mr Market thumbed its nose and proved everyone wrong by continuing to trundle up.

Let us look at the 6 months bar chart pattern of the FTSE 100 to see if it is trotting or cantering:-


(Please right-click on the image above and open it in a new tab or window for a better view.)

After a spurt in early April '09 followed by a reaction, the FTSE 100 index has been moving in a sideways fashion with a slight upward bias. The 20 day and 50 day EMAs have become entangled, with the short term average ever so slightly above the medium term one.

The index is unable to move up fast - much like the Dow, and quite unlike the KOSPI or even the Hang Seng. Like the Dow, volumes are lower in Apr '09 than in Mar '09. The FTSE 100 is below its Jan '09 and Feb '09 tops, and well below the 200 day EMA. The bears are not giving up without a fight.

The slow stochastics has just moved into the overbought zone, indicating that the rally may have some more upside. The MACD is confirming that, with a gradual upward movement. However, the ROC and RSI are both making lower tops and moving sideways.

Bottomline? This rally should be utilised to lighten holdings - particularly in non-performing shares. Not a great time to enter. There will be better opportunities in the near future.

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