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Sunday, June 13, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Jun 11, '10

FTSE 100 index chart

FTSE_Jun1110

The FTSE 100 index chart pattern closed 40 points higher on a weekly basis, but once again faced resistance from the falling 20 day EMA. The falling 50 day EMA is still above the 200 day EMA, keeping faint bullish hopes alive.

The index made a higher bottom and started a pullback that may continue next week. The slight up-tick in the volumes and the positive divergences in the technical indicators are suggesting as much.

The slow stochastic is just above the 50% level. Ditto for the RSI. The MFI is moving up and is just below the 50% level. The MACD is above the signal line and rising in negative territory.

DAX index chart

DAX_Jun1110

The chart pattern of the German DAX index never really entered a bear market, spending only 2 days below the 200 day EMA. Contrast that with the FTSE 100 which has already spent 17 straight trading sessions below the 200 day EMA.

The pullback effort by the bulls, after the index made a higher bottom, has once again taken the DAX above all three EMAs. The 20 day EMA is about to move above the 50 day EMA, spending just 15 trading sessions below it and going nowhere near the 200 day EMA.

However, to negate the bearish 'lower top - lower bottom' pattern formed since the DAX touched a high of 6342 in Apr '10, the index needs to close above the May '10 closing high of 6252. That is still 200 points away.

All four technical indicators are showing positive divergences. The MACD is still negative but rising above the signal line. The RSI is above the 50% level. The MFI is touching its mid-point. The slow stochastic is just below the overbought zone.

CAC 40 index chart

CAC_Jun1110

The chart pattern of the French CAC 40 index shows that the bulls have not been left behind in the weakest of the three European indices. The index made a higher bottom and the pullback ensured a 100 points higher close on a weekly basis.

More importantly, the CAC 40 closed above the 20 day EMA for the first time in 7 weeks. That should encourage the bulls to try and loosen the strong bear grip by pushing the index above the 50 day and 200 day EMAs.

The positive divergences in the technical indicators and decent volumes may provide the necessary impetus to the bulls. The slow stochastic and RSI are both above their 50% levels. The MFI is marginally below the 50% level. The MACD is above the signal line and rising in negative territory.

Bottomline? The chart patterns of the European indices are showing some signs of life from the bulls, after spending nearly 2 months in a strong bear grip. The time is not yet ripe to jump in with both feet. Another hint of a sovereign default can send the indices tumbling. Selective buying and topping up of existing portfolios may be a good idea.

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