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Sunday, July 18, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Jul 16, '10

FTSE 100 Index Chart


The closing chart pattern of the FTSE 100 index is back in bear territory again, after a brief sojourn above the 200 day EMA. My concluding remarks from last week may seem almost prophetic, but it really was an educated guess:

'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).'

The FTSE 100 tested the Jun '10 top of 5299, but fell short and started falling again. Volumes remained meagre during the week but increased on Friday's down day. A sign of distribution. The bulls will point out that the index closed slightly higher on a weekly basis, and hasn't dropped below the 20 day EMA yet.

The technical indicators are looking promising. The MFI and RSI are above their 50% levels. The MACD is marginally positive and above the signal line. The slow stochastic is showing weakness, by turning down after touching the overbought zone.

One can expect a bit of sideways consolidation between 4800 and 5300, before the FTSE 100 makes up its mind about which direction it wants to go.

DAX Index Chart


The low volumes and negative divergences in the slow stochastic and RSI last week had hinted at an end to the pull back rally in the DAX index chart. A 'reversal day' pattern (higher high, lower close) on Thursday Jul 15 '10 was followed by Friday's 100 point fall on the highest volume of the week. Signs of distribution.

The index closed 25 points lower on a weekly basis. But the technical indicators are looking slightly bullish. The MACD is positive and above the signal line. The RSI and MFI have edged above the 50% level. The slow stochastic is also above the 50% level, but has turned down.

Since hitting the Apr '10 top, the DAX is moving sideways, oscillating about the 50 day EMA. The 200 day EMA is rising with the index above it. The long-term bull market is still in tact.

CAC 40 Index Chart


The CAC 40 index chart pattern remains the weakest of the three European indices, and has reverted to the bear market. The index managed to touch the 200 day EMA from below on intra-day basis on Wednesday and Thursday, but the resistance from the long-term average proved too strong.

The technical indicators have turned mildly positive. The MFI, RSI and slow stochastic are above their 50% levels but have stopped moving up. The MACD has just entered positive territory and above the signal line.

Bottomline? The pull back rallies in the chart patterns of the European indices have come to an end for now. The bears will try to push their feet down on the gas pedal to accelerate the fall. The bulls will try to keep the index above the lows made earlier in the month. Wait and watch till a clearer trend emerges.

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