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Sunday, March 7, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Mar 5, '10

FTSE 100 index chart

FTSE_Mar0510

What a sea change in the FTSE 100 index chart in one week - as if the PIIGS have learned to fly! The realisation that Greece may not default on its sovereign debt after all (thanks to a little help from their Eurozone friends) was a huge relief for the bulls.

The FTSE not only tested its previous high of 5600 made on Jan 11 '10 but edged above it on Friday, and closed bang on the 5600 mark - its highest close since the bull rally began a year ago.

The technical indicators are suggesting that the bull party may continue. The 20 day EMA has moved above the 50 day EMA and all three EMAs are moving up with the index above them.

The slow stochastic is well inside the overbought zone. The MACD is rising in the positive zone and is above the rising signal line. The RSI is about to enter the overbought zone. The MFI is just below the overbought zone.

Have the bears been well and truly routed? Not quite. The FTSE 100 index has touched its previous high but hasn't gone convincingly above it as yet. Last week's rally has been on progressively decreasing volumes. The RSI is also showing a negative divergence. The bears may try to stall, if not stop, the bulls.

DAX index chart

DAX_Mar0510

The bulls shook off the bear shackles and made a spirited fight back as the German DAX index sailed above the 20 day and 50 day EMAs on decent volumes.

The slow stochastic has entered the overbought zone. The RSI and MFI are both above their 50% levels. The MACD has entered the positive zone after more than a month and is above the signal line. But the DAX still has to clear the Jan '10 high of 6094 before the bulls can take total control.

CAC 40 index chart

CAC_Mar0510

The French CAC 40 index also joined the bull rally with renewed vigour on good volumes. The 20 day EMA is still below the 50 day EMA but should cross above it next week.

The MACD has entered the positive zone and is above the rising signal line. The RSI and MFI are both above their 50% levels. The slow stochastic has entered the overbought zone.

The only solace for the bears is that the CAC 40 index is still 178 points below its Jan '10 high of 4088.

Bottomline? The chart pattern of the European indices show that a cloud (in the form of Greece's debt default) seems to have lifted and there is no holding back the bull rally. Investors can buy selectively after the previous highs are cleared.

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