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Sunday, May 16, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - May 14, '10

FTSE 100 index chart

FTSE_May1410

Last week, I had concluded the analysis of the FTSE 100 index chart pattern with this comment:

'Any upward bounce can be used to sell.'

A strong pullback in global indices led the FTSE 100 to vault above the 200 day EMA and hit the 5400 mark on good volumes. But the bulls ran out of steam soon after.

A brief spurt on the lowest volumes of the week saw the index close above the 5400 level on Thursday. By Friday, the bears were back in business, as the FTSE 100 dropped down to the 200 day EMA for support and closed below the 5300 level. (Friday's trade not updated on chart.) The index gained 140 points for the week.

The technical indicators perked up briefly, but are looking bearish again. The 20 day EMA is below the 50 day EMA and both are sliding down, with the index below them. Support from the 200 day EMA may be breached again soon.

The slow stochastic bounced up from the oversold zone but is about to  move down again. The MACD rose a bit in negative territory but is below the signal line. Both the RSI and MFI moved up after touching their oversold zones, but remain below their 50% levels.

DAX index chart

DAX_May1410 

The German DAX index chart pattern displayed the strength of its economy by spurting sharply upwards - making bullish higher tops and bottoms on the first four days of the week. It sailed smoothly past the 50 day and 20 day EMAs from below, but on decreasing volumes.

Looks like my expectation of a breach of the 200 day EMA will need to wait for a while. Friday's profit booking on good volumes pushed the DAX below the 6100 level where it received support from the 20 day EMA. The index gained a strong 730 points for the week.

The technical indicators are reflecting the bullishness. All three EMAs are moving up again. The MACD is barely negative and touching the signal line. The RSI is slightly below the 50% level. The slow stochastic has moved above its 50% level. Only the MFI is showing the effects of the low volumes by moving down before reaching its mid-point.

CAC 40 index chart

CAC_May1410

The CAC 40 index chart pattern has not been able to fend off the bear attack despite a heroic effort by the bulls that saw the index rise by a whopping 9.5% on Monday. But the index failed to close above the 200 day EMA throughout the week.

On Wednesday and Thursday, the index did move above the 200 day EMA on intra-day basis, and gained almost 5% on a weekly basis. But it was a case of too little too late.

The 20 day EMA is about to drop below the 200 day EMA. The longer-term moving average has started to turn down. Both are very bearish indications.

The slow stochastic, RSI and MFI all made unsuccessful efforts to reach their 50% levels, and have turned downwards. The MACD rose a bit in negative territory but failed to move above the signal line.

Bottomline? The DAX index chart pattern is exhibiting some resilience and managed to stave off the bears. The FTSE 100 chart pattern is at a very crucial support and looking weak. The CAC 40 chart pattern has reverted to the bear market. Till the Eurozone debt problems are resolved satisfactorily, the indices will remain under bear pressure. Move to cash or gold may be advisable.

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