Thursday, June 4, 2009

FTSE 100 Index Chart Pattern - Jun 4, 2009

The tussle between the bulls and bears continued with the FTSE 100 index chart pattern in a sideways consolidation. The overhead resistance is being provided by the 4500 level. The FTSE managed a couple of closes above its 200 day EMA and then moved down to seek support from the 20 day EMA.

The UK economy is not showing any great signs of revival. Gordon Brown appears to be losing his grip over his party and the government. These signs are not conducive for the trend change to a bull market.

In a recent interview, Stephen Roach, Head of Morgan Stanley Asia said that the current global stock market rally is not based on fundamentals. The huge stimulus and domestic consumption in the economies of China and India may not be sufficient to pull global economies out of the rut.

The stock markets of both China and India have entered bull phases. But the 3 months bar chart patten of the FTSE 100 index shows that the UK markets are yet to follow suit, with both the short-term and medium term EMAs still below the 200 day EMA:-


The slow stochastic bounced up from the 50% level and tried to move up to the overbought zone. It failed in its efforts and is dropping down towards the 50% level again.

Both the ROC and RSI are at their mid-points. The MACD is in positive zone but below its signal line. The only difference from the previous week's chart pattern is the uptick in volumes over the last couple of trading sessions.

Bottomline? The FTSE 100 index chart pattern is yet to make a decisive move above its 200 day EMA. It needs to stay above the long-term moving average for 10-12 sessions continuously for the trend to change from bear to bull. Till then, the strategy for investors should be to book some profits on every rise in the market.

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