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Sunday, September 12, 2010

Stock Index Chart Patterns - FTSE 100, DAX, Stockholm General – Sep 10, '10

FTSE 100 Index Chart

FTSE_Sep1010

The FTSE 100 index chart pattern had given enough indication a week ago that the momentum had swung towards the bulls. The receding volumes and negative divergences in the technical indicators were a concern.

The index failed to progress during the first three days of the week. Volumes were tepid on Mon. Sep 6 ‘10, and picked up on Tuesday’s down day. Volumes rose on the next two up days, as the FTSE 100 first crossed the 5500 level intra-day, and then closed the week at 5501 – its highest close in more than 4 months.

The 20 day EMA has moved above the 200 day EMA and the 50 day EMA has got its nose above the long-term moving average. A bullish ‘higher tops – higher bottoms’ pattern has formed since the index hit the low of 4790 on Jul 1 ‘10. The FTSE 100 is technically back in a bull market. The Apr ‘10 top of 5834 is the lone hurdle in the path of the bulls.

The technical indicators are looking bullish. The slow stochastic is in the overbought zone. The MACD is above the signal line, and rising in positive territory. The RSI and MFI are both above their 50% levels and climbing. The negative divergences in the MACD and RSI, which failed to make new highs with the index, remain the only hope for the bears to stall the bull charge.

DAX index chart

DAX_Sep1010

The DAX index chart had spent 3 trading sessions below the 200 day EMA in early Jul ‘10. In end Aug ‘10, a slightly longer spell (of 6 days) below the 200 day EMA was followed by a jump up into the bull market.

The DAX closed the week above the 6200 level, and looks all set to make a new high past the Aug ‘10 top of 6387. The 20 day EMA has crossed above the 50 day EMA, and all three EMAs are moving up with the index above them.

The technical indicators are supporting the bulls. The slow stochastic has entered the overbought zone. The MACD is above the signal line and has turned positive. The RSI and MFI are both above their 50% levels.

Stockholm General index chart

Stockholm_Sep1010

The Stockholm General index chart pattern spent just a day below the 200 day EMA before resuming its bull charge. It closed the week at 335, which is less than 1% below its Aug ‘10 top of 338 and less than 2% below the Apr ‘10 top of 341. One can expect a new high very soon.

The 20 day EMA has moved above the 50 day EMA, and all three EMAs are moving up with the index above them. The technical indicators are looking bullish. The slow stochastic is in the overbought zone. The MACD is above the signal line and rising in positive territory. The RSI is above the 50% level and the ROC is rising in positive territory.

Is it ‘game over’ for the bears? Take a look at the higher bottom made by the Swedish index in late Aug ‘10. The MACD, RSI and ROC made lower bottoms. The negative divergences may lead to a correction down to the 20 day EMA. That would be an opportunity to add.

Bottomline? The chart patterns of the European indices are back in bull markets after decent corrections. They are within handshaking distances of their 52 week highs. One can buy the dips, but with strict stop-losses.

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