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Tuesday, November 16, 2010

American Index Chart Patterns – one year charts

Last month, I had taken a look at the 5 year chart patterns of American indices. The S&P 500 and the Canada TSX charts remained well below their all-time highs and were struggling to cross their Apr ‘10 tops. The Brazil BOVESPA chart was a little below its all-time high. The Mexico IPC and the Argentine MERVAL charts were at new all-time highs.

Some interesting changes have occurred since last month’s post, which the one year chart patterns of the American indices will reveal:

S&P 500 Index Chart

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Last week, the S&P 500 index chart moved marginally above the intra-day and closing high levels touched in Apr ‘10. The 50 day and 200 day EMAs are rising with the index above them. Note that the 50 day EMA straddled the 200 day EMA for two months before moving up. The S&P 500 has made a bullish pattern of higher tops and higher bottoms. All point to a revival of the bull market.

That was the good news. Now the bad. By dropping below the 1200 level and failing to move significantly above the Apr ‘10 top on reduced volumes, the index may be forming a bearish double-top pattern. The double-top can be confirmed only if the index falls below the Jul ‘10 low. Should that happen, the S&P 500 index chart can drop to 900.

The bearish possibility will be negated if the index bounces up after finding support at the 50 day or 200 day EMA. Such an upward bounce will be an adding opportunity.

Canada TSX Composite Index Chart

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The Canada TSX Composite index chart touched a new 52 week closing high of 13052 on strong volumes – well above its Apr ‘10 top of 12281. Like the S&P 500, it is facing a bit of correction.

Note that the 50 day EMA formed a bullish saucer-like pattern and didn’t fall to the 200 day EMA. The TSX Composite index had dipped below the 200 day EMA for only 7 trading sessions during the past 12 months and remains in a bull market. Use the dip to add.

Mexico IPC Index Chart

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The Mexico IPC index chart touched a new all-time high of 36814 last week and ended up gaining almost 1600 points (4.5%) since my previous post.

Bulls are in complete command, and the dip following the new high is an adding opportunity. Note that the IPC index hasn’t dropped below the 200 day EMA even once during the past year.

Brazil IBOVESPA Index Chart

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The Brazil IBOVESPA index chart comfortably crossed its Apr ‘10 intra-day and closing highs with more than 1000 points to spare, but fell 400 points short of its all-time high of 73517 (touched in May ‘08).

The bears launched a strong attack to take the index down to the 70000 level and the rising 50 day EMA. Note that the RSI has been rising while the IBOVESPA index has been correcting. The index is likely to resume its up move soon.

MERVAL Buenos Aires Index Chart

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The Argentine MERVAL index chart pattern touched a new all-time high of 3381 on Nov 5 ‘10. The index has risen too steeply above the 50 day EMA and is looking overbought.

The RSI has been inside the overbought zone for the past three weeks, which is unusual. The correction may last a little longer.

Bottomline? The one year American index chart patterns are in bull markets of varying strengths. Stay invested with trailing stop-losses, or add the dips.

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