Monday, June 18, 2012

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jun 15, ‘12

S&P 500 Index Chart

S&P 500_Jun1512

The S&P 500 index chart dropped below all three EMAs on Mon. Jun 11 ‘12, but quickly bounced up and closed the week above all three EMAs on a volume spurt. In last week’s analysis, bullish technical indicators had pointed to the possibility of a continuation of the rally, provided there was volume support.

The 20 day EMA has turned up. So has the 50 day EMA. ‘Death cross’ of the 50 day EMA below the 200 day EMA has been averted for now, which means the index is technically in a bull market down trend.

Technical indicators continue to look bullish. RSI is above its 50% level. MACD is climbing above its signal line towards its positive zone. Slow stochastic is inside its overbought zone, where it may remain for some time.

The economic recovery is quite weak. Initial claims of unemployment benefits have started inching up again. Manufactured goods orders are down. Market players are expecting an extension of ‘Operation Twist’ or even a dose of QE3 to revive the economy. If neither happens, the rally may stall.

FTSE 100 Index Chart


A bear market rally on the FTSE 100 chart is facing strong resistance from the falling 50 day EMA – a possibility mentioned in last week’s analysis.

Technical indicators are looking bullish, which means the rally may try to cross above the 50 day EMA and test the 200 day EMA. RSI has moved above its 50% level. MACD is negative, but rising above its signal line. Slow stochastic is at the edge of its overbought zone.

The ‘positive outcome’ of the elections in Greece may provide a temporary impetus to global markets. An economic catastrophe – which a break-up of the Eurozone would have caused – has been avoided. But Eurozone sovereign debt problems are yet to be solved, and economic growth remains a distant dream.

Bottomline? The S&P 500 index is technically in a bull market down trend. The rally during the past two weeks managed to keep the bears at bay. Enter on a cross above 1360 level. Bears are still ruling the FTSE 100 chart. Stay away, or use the current rally to lighten up.

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