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Monday, February 21, 2011

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Feb 18, ‘11

S&P 500 Index Chart

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There is not much to add from last week’s post about the S&P 500 chart. The index has continued its steady rise away from the 50 day EMA, which in turn is rising away from the 200 day EMA.

The technical indicators look very bullish. The MACD is above its signal line, and both are rising in positive territory. The slow stochastic remains well inside the overbought territory. The RSI has moved up sharply into the overbought zone.

The S&P 500 index chart looks overbought and ripe for a correction. But the way every dip is being used by the bulls to buy, any correction may be a short one. The economy shows signs of slow growth. Likewise for inflation. Interest rates remain negligible. There doesn’t seem to be any chance of the bears coming out of their hibernation.

Maintain trailing stop-losses and enjoy the ride.

FTSE 100 Index Chart

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The FTSE 100 chart has failed in several recent attempts at moving above the 6100 level. That is no reason for bears to feel excited. The index has formed a bullish ‘ascending triangle’ pattern (flat top, rising bottoms) during Feb ‘11. The likely break out is upwards, with a target of close to 6400. The upward break out should be accompanied by a significant increase in volumes – otherwise the break out may turn out to be ‘false’.

The technical indicators are bullish. The MACD is above the signal line and rising in positive territory. The slow stochastic is rising inside its overbought zone. The RSI is moving up towards its overbought zone. Looks like the FTSE 100 will soon reach greater heights.

The news is not so good for public sector employees who have lost their jobs due to the financial tightening. Private sector companies are not particularly keen to hire them.

Bottomline? The chart patterns of the S&P 500 and FTSE 100 indices are in strong bull markets. Money is moving out of emerging markets into the US and European markets. That is fuelling the bull rally. Stay invested with trailing stop-losses.

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