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Monday, June 11, 2012

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jun 08, ‘12

S&P 500 Index Chart

S&P 500_Jun0812

In last week’s analysis of the S&P 500 index chart pattern, positive divergences in RSI and slow stochastic (which touched higher bottoms as the index dropped lower) and the support zone between 1250-1300 were expected to provide some consolidation or an upward bounce.

A strong bounce took the index above its 200 day EMA and 20 day EMA, but is facing resistance from the 50 day EMA. The good news for the bulls is that the 50 day EMA is 20% above the 200 day EMA; only when the 50 day EMA falls below the 200 day EMA can a bear market be confirmed technically. The bad news is that volumes were highest on the only down day during the week.

Technical indicators are looking bullish. RSI is just above its 50% level. MACD is negative, but rising above its signal line. Slow stochastic has entered its overbought zone. There is still some steam left in the up move, but without volume support the rally is likely to stall.

FTSE 100 Index Chart


Positive divergences in all three technical indicators, which touched higher bottoms while the FTSE 100 index dropped lower, propelled the index above its 20 day EMA. The falling 50 day EMA is likely to resist a further up move.

Technical indicators are turning bullish. RSI is just below the 50% level. MACD is negative, but rising above its signal line. Slow stochastic has risen sharply above its 50% level and is ready to enter the overbought zone. The FTSE 100 is in a bear market, so such counter-trend rallies are good opportunities for selling.

Bottomline? The S&P 500 index is technically still in a bull market and is trying to stay above the 200 day EMA. Another drop to the support zone of 1250-1300 can’t be ruled out. Bears are in control over the FTSE 100 index. Remain cautious and preserve cash.

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