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Sunday, May 30, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - May 28, '10

FTSE 100 index chart

FTSE_May2810

The FTSE 100 index chart pattern ended an eventful week by closing 125 points higher on a weekly basis, keeping the flickering bullish hopes alive. But what happened during the week should be a cause for concern.

The index fell to a new low of 4898 on an intra-day basis on Tuesday, and closed the day at 4941 - its first close below the 5000 level in 8 months. The close below the Feb '10 low of 5033 was not technically convincing. Note that the 3% lee-way level below 5033 is 4882.

That allowed the bulls to mount a swift buying attack on decent volumes that took the index up to the level of the merged 20 day and 200 day EMAs, as well as to the down trend line joining the lower tops. Expectedly, there was stiff resistance and the FTSE 100 closed the week at 5188.

The technical indicators have improved. All four are moving up. The slow stochastic and MFI are a bit below their 50% levels. The RSI has managed to reach the 50% level. The MACD has started to rise in the negative zone but is still below the signal line.

With the Greece problem temporarily resolved, the bulls were beginning to regain confidence. The news from Spain poured cold water on their new found enthusiasm. The odds are favouring a resumption of the down move - may be after a period of consolidation.

DAX index chart

DAX_May2810

The DAX index chart pattern formed the expected bearish 'lower top - lower bottom' pattern, dropping to 5608 on Tuesday and closed below the 200 day EMA at 5670. The bulls mounted a counter attack that took the index above the 200 day EMA and up to the flattened 20 day EMA.

More importantly, the Feb '10 low of 5433 wasn't breached. The falling 50 day EMA at 6000 and the May '10 top of 6277 will be the barriers to up moves.

The technical indicators are beginning to indicate short-term bullishness. The MACD is rising in negative territory but is still below the signal line. The RSI has edged above the 50% level. The MFI has moved up to the 50% level. The slow stochastic has also started to move up but is below the 50% level.

CAC 40 index chart

CAC_May2810

The CAC 40 chart pattern is now in a technically confirmed bear market because the 50 day EMA has moved below the 200 day EMA and the index is below all three EMAs.

The fight back by the bulls, after making a new low of 3288 on Tuesday, could not take the index up to the falling 20 day EMA. The index made an intra-day high of 3553 on Friday - just 7 points higher than the Feb '10 low of 3546 - before closing about 80 points higher on a weekly basis at 3515.

The slow stochastic and MFI are both moving up, but remain below their 50% levels. The RSI has moved up to the 50% level. The MACD is negative, but has risen to touch the signal line.

Bottomline? The chart pattern of the European indices moved up last week - probably due to short covering plus some investment buying. Bears are likely to use such up moves to sell. Investors should remain patient and on the sidelines.

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