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Sunday, July 11, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Jul 09, '10

FTSE 100 Index Chart


A nice pull back on the chart pattern of the FTSE 100 index that should not have come as a surprise to the readers of this blog. The index had fallen too far below the 20 day EMA, plus the positive divergences observed in the MFI and MACD last week had hinted at a pull back.

The smart 6% weekly gain could not take the FTSE 100 up to the 50 day EMA, which has slipped below the 200 day EMA. Bulls will need to continue with their endeavours next week and push the index above the 200 day EMA to get out of the clutches of the bears.

The technical indicators are turning positive, but are not bullish yet. The slow stochastic has emerged from the oversold zone but hasn't reached the 50% level. The MACD has moved up but remains in negative territory and is touching the signal line. The RSI has bounced off its oversold zone but is still below the 50% level. The MFI is touching its mid-point.

Volumes have been meagre during the pull back rally, and actually dropped on an up day on Friday. That doesn't hold out great hopes for the sustainability of the rally. As the Boy Scouts would say: 'Be Prepared' (for a bear attack).

DAX Index Chart


The chart pattern of the DAX index just refuses to let the bears get the upper hand, and not only bounced up sharply from the 200 day EMA but proceeded to climb above the intertwined 20 day and 50 day EMAs.

Note that the 200 day EMA has provided excellent support to the DAX - five times in the past 6 months. So, is it time for the bulls to run riot, as they do in Pamplona every year? The low volumes don't inspire confidence at all. Neither do the technical indicators.

The MACD is still negative and below the signal line. The RSI, MFI and slow stochastic are trying to move up but all three are below their 50% levels. A bigger concern for the bulls are the negative divergences visible in the RSI and slow stochastic - lower bottoms while the DAX index made a higher one.

CAC 40 Index Chart


The chart pattern of the CAC 40 index caught the bullish contagion, pulled back sharply above the 20 day EMA but stopped short of the 50 day EMA. Volumes fell off during the last three days as the index climbed. Not a good sign for bulls.

No surprise that the MFI has dropped to the 50% level. The RSI and slow stochastic are moving up but remain below their 50% levels. The MACD has moved up a bit in negative territory, but not above the signal line.

Bottomline? The chart patterns of the FTSE 100 and CAC 40 are still in bear territory. The DAX chart has managed to keep the bears at bay - at least for now. These are troubled waters, and only the intrepid should venture out for fishing. Investors may continue to wait for a clearer trend to emerge.

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