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Sunday, August 30, 2009

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Aug 28, '09

The stock index chart patterns of the European markets were in an exuberant mood in the previous week - having joined the bull party a bit late - but there were concerns about the negative divergences from the technical indicators.

No wonder the indices had a week of sideways consolidation, as will be evident from the 3 months bar chart patterns below.

FTSE 100 index chart


The FTSE managed a 1% higher close for the week, after touching a new high of 4944 last Friday. No particular significance of that level, which is a 45% retracement of the entire bear market fall from 6754 on Jul 13, '07 to 3461 on Mar 9, '09. 5100 is the 50% retracement level where a strong resistance can occur.

Volumes have improved but are not that encouraging. The RSI and MFI have started to move down, but are above the 50% level. The slow stochastic has re-entered the overbought zone. The MACD has edged above the signal line. A bit of a mixed bag with a slight positive bias.

All three EMAs are charging upwards, so the bull rally is intact and likely to continue for a while, in spite of the weaknesses in the RSI and MFI.

DAX index chart


The German index and the technical indicators are still playing catch up with the FTSE, like last week, while the DAX index also closed about 1% higher for the week after touching a new high of 5575. That's a 43.5% retracement of the entire bear market fall from 8152 on Jul 13, '07 to 3589 on Mar 9, '09.

Volumes have improved marginally. The RSI and MFI are both at the 50% level. The slow stochastic is about to enter the overbought zone. The MACD has moved up to touch the signal line.

Like the FTSE's averages, the three EMAs are moving up which means the bull rally is likely to continue a little longer.

CAC 40 index chart


Like last week's chart patterns, the CAC 40 is looking more like the FTSE 100 chart and stronger than the DAX, with a 2% higher close for the week. But the new high of 3724 last Friday has retraced only 34% of the bear market fall from 6168 on Jun 1, '07 to 2465 on Mar 9, '09. The 38.2% Fibonacci retracement level is 3880.

Much better volumes with all three EMAs on up moves. The RSI is moving down but is above the 50% level. The MFI is resting on the 50% level. The slow stochastic has re-entered the overbought region. The MACD is above the signal line.

Bottomline? The European index chart patterns are likely to continue moving up till they hit Fibonacci resistance levels. That means another 5-7% up side from current levels. Keep trailing stop losses and enjoy the rally while it lasts.

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