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Thursday, May 7, 2009

FTSE 100 Index Chart Pattern - May 06, 2009

This is what I had inferred from the technical indicators of the FTSE 100 Index chart pattern last week:-

'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.'

Some times the technical indicators do provide quite accurate insights into the market's underlying strength. Let us have a look at the 6 months bar chart pattern of the FTSE 100:-

FTSE_May0609

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

Breaking off the shackles of indecision and playing catch up with the Asian markets, the FTSE 100 index seemed to make a dash upwards to enter bull territory. The 200 day EMA is providing the expected resistance.

The slow stochastics is comfortably in the overbought zone. The MACD is still rising. Even the ROC is showing an upward bias. Only the RSI is looking a bit reticent. Volumes are OK.

The index may still have some up side left. The only note of caution is the rapid rise of the index above its 20 day EMA. Every time it has done that in the past 6 months - in Dec '08, Jan '09 and Apr '09 - it has fallen back to take support on the short-term average.

Bottomline? Wait for the correction to enter, if you must. A rush of liquidity is forcing the global markets to go up. The underlying economies don't look out of the woods yet. I am waiting for sanity to prevail.

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