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Sunday, September 5, 2010

Stock Index Chart Patterns - FTSE 100, Swiss Market, Madrid General – Sep 03, '10

FTSE 100 Index Chart

FTSE_Sep0310

Just when the bears were getting ready to take the FTSE 100 index to lower depths, the bulls executed a neat bear-trap. Volumes were good on Tue. Aug 31, ‘10 but the resistance from the confluence of the three EMAs stalled the day’s rally.

On Wed. Sep 1 ‘10, the index jumped above all three EMAs and closed at the highest point of the day, but on lower volumes. Volumes dwindled as the FTSE 100 rose higher. The index closed with a weekly gain of 224 points at 5428 – its highest close in nearly 4 months.

The three EMAs are still entangled and the index has moved well above them. But the decreasing volumes during the week’s rise is a concern. The slow stochastic (above its 50% level), the MACD (positive and above the signal line) and RSI (above its 50% level) are all looking bullish – but made lower tops as the index moved higher. Only the MFI (also above its 50% level) rose higher with the index.

Unless there is follow-up buying next week, the rally may not proceed very far. But the momentum has swung towards the bulls for now.

Swiss Market (Switzerland) index

Swiss (SSMI)_Sep0310

My first look at the Swiss Market (Switzerland) seems auspicious. The index closed more than 100 points higher on a weekly basis and bang on the 6400 level – its highest close in more than 2 months. More importantly, it moved above the 200 day EMA, after remaining below the long-term moving average for 10 weeks.

Volumes peaked on Wed. Sep 1, ‘10 but dropped on the next two days as the index moved higher. Negative divergences are clearly visible in all the four technical indicators – which made lower tops while the Swiss Market moved higher.

The technical indicators are mildly bullish. The slow stochastic and MFI are both above their 50% levels. The RSI is at the 50% level. The MACD is negative, but above the signal line.

The 50 day EMA is below the 200 day EMA. The 20 day EMA is below the 50 day EMA, though it is trying to move above the medium-term moving average. The bears hold the advantage.

The Apr 15 ‘10 top of 6991 is the barrier the bulls need to cross for the index to re-enter a bull market. Doesn’t seem an easy task at this stage.

Madrid General (Spain) index

Madrid (SMSI)_Sep0310

The Madrid General (Spain) index is in the midst of a similar, yet less convincing, bull rally. It closed 46 points (4.4%) higher on a weekly basis, and above the 200 day EMA, but is yet to cross its Aug ‘10 high of 1133.

The 20 day EMA is above the 50 day EMA, but both are below the 200 day EMA. The bears hold the advantage, though the technical indicators are turning bullish.

The slow stochastic, RSI and MFI are above their 50% levels. The MACD is touching the signal line in negative territory. Note that all the four indicators made lower bottoms in Aug ‘10 than the ones made in Jul ‘10, while the Madrid General index made a higher bottom. The negative divergences could put a quick end to the bull rally.

Bottomline? The European indices are fighting hard to get out of tight bear grips. The bears have weakened a bit, but have retained their hold. The worst isn’t over yet for the European economies, and the charts are reflecting that. Very selective buying in the FTSE, and a ‘hold’ in the Madrid General and Swiss Market advised.

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