Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Nov 27, '09

FTSE 100 index chart

Last week's analysis of the FTSE 100, CAC 40 and DAX index chart patterns was concluded with the following comments:-

'The technical indicators in the European indices are favouring the bears. The bull rally is under real threat.'

The FTSE 100 chart made a valiant attempt to go past the previous top of 5397. Four days in a row, it came within handshaking distance but failed to move higher.

The Dubai loan re-scheduling news tilted the scales towards the bears. The index once again closed the week marginally lower and below the 5300 level. Friday's sharp drop below the 50 day EMA was followed by a rapid recovery back up to the 20 day EMA. That, and the rising 200 day EMA should give the bull's some encouragement.

The technical indicators may belie their hopes. The volumes on down days continue to be higher. The RSI and MFI have both dropped to their 50% levels and show negative divergence. The slow stochastic has dropped from the overbought zone after entering it earlier in the week. The MACD has slipped below the signal line and also shows negative divergence.

DAX index chart

The DAX index chart actually managed to close 22 points higher for the week, but failed to get past even its Nov 18 high of 5843. The Dubai effect caused almost identical price action to that of the FTSE 100 on the last two days of the week - sharp falls on higher volumes.

The slow stochastic has dropped from the overbought zone. The RSI is headed down to the 50% level. The MFI is at its 50% level. The MACD is barely above the signal line. For the bull rally to sustain, the German index needs to cross its Oct 20 '09 high of 5888 soon.

CAC 40 index chart

The bears seem to have mauled the CAC 40 index chart the worst. A bearish lower-top-lower-bottom pattern has formed. The French index dropped close to the 200 day EMA and closed marginally lower for the week, just below the 50 day EMA.

The slow stochastic has dropped to the 50% level. The RSI has slipped below its 50% level, while the MFI is barely clinging on. The MACD has moved into the negative zone and below the signal line.

Bottomline? The European indices are under bear attack. Watch out for the lows made in the first week of Nov '09. If those levels get violated, the indices will fall deeper. Book profits.