Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Nov 13, '09

FTSE 100 index chart

In last week's analysis, I had pointed out that the previous top of 5300 could be a potential barrier that the FTSE 100 needed to cross with conviction for the renewal of the bull rally.

The bears seemed to be well aware of it. A couple of minor forays above the 5300 mark on Wed, Nov 11 '09 and Thurs, Nov 12 '09 was all that the index managed to accomplish, before closing at 5296 (its highest close since Sep '08).

The volume dipped considerably on Fri, Nov 13 '09, striking a discordant note. All three EMAs are moving upwards together, and the index is above them, so there seems to be no immediate threat to the bull rally.

The slow stochastic has moved sharply up into the overbought zone, supporting the bulls. The MACD has moved above the signal line. The MFI has moved above the 50% level. The RSI has dropped back to the 50% level after moving above it.

The technical analysis indicators are looking a lot stronger than last week. But bears can take heart from the negative divergences (lower highs, as the FTSE made higher tops), and try to put up a better fight next week.

DAX index chart

The DAX index took a cue from  the bullishness in the FTSE 100 and moved above both the 20 day and 50 day EMAs, but failed to get anywhere close to its Oct '09 highs. The falling volumes doesn't look too encouraging, though the bulls have regained the upper hand for the time being.

The technical indicators are favouring a continuation of the rally. The slow stochastic has crossed above the 50% level. The MFI is at its 50% level. The RSI is just below the mid-point. The MACD has moved above the signal line, though it is still in negative territory.

CAC 40 index chart

The CAC 40 index is emulating its neighbour in several respects. It moved above the 20 day and 50 day EMAs on falling volumes, but failed to regain its Oct '09 highs. The slow stochastic has moved above the 50% level.

The other indicators seem to have traded levels. The RSI is at the 50% level and the MFI is just below the mid-point. The MACD is above the signal line and has entered positive territory.

Bottomline? The technical indicators of the European stock indices are favouring the bulls. But the negative divergences in the FTSE 100 chart can pull the index down, and have a negative influence on the DAX and CAC 40 indices. Partial profit booking recommended. This isn't a great time to enter.