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Monday, August 13, 2012

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Aug 10, ‘12

S&P 500 Index Chart

S&P 500_Aug1012

The 6 months daily closing chart pattern of the S&P 500 index is hesitating a bit near its May ‘12 top. Such behaviour is to be expected – not because charts have memory, but because market participants certainly do.

Note that the last leg of the zig-zag up move has been accompanied by steadily falling volumes, which is bearish. The index has moved too far above its rising 200 day EMA. The time is ripe for some profit booking.

Technical indicators are bullish, but the upward momentum is slowing down. RSI is above its 50% level, but moving sideways. MACD is positive and above its signal line, but stopped rising. Slow stochastic is well inside its overbought zone, and also moving sideways.

New claims for unemployment benefits are falling slowly. New jobs are also being added slowly. A double-dip recession may be off the table, but the US economy is far from a robust growth rate. 

FTSE 100 Index Chart

FTSE_Aug1012

The 6 months daily closing chart pattern of the FTSE 100 index sailed past its May ‘12 top, but stopped short of its Apr ‘12 top. The 50 day EMA has crossed above the 200 day EMA – the ‘golden cross’ technically confirming a return to a bull market.

Technical indicators are bullish, but showing signs of slowing upward momentum. RSI is above its 50% level, but turning down. MACD is positive and above its signal line, but the histogram has started to fall. Slow stochastic is well inside its overbought zone, but moving sideways.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are showing some hesitancy near May ‘12 and Apr ‘12 tops respectively. Some profit booking can be expected. Up trends from the Jun ‘12 lows are intact. Any sharp correction down to the 20 day or 50 day EMAs can be adding opportunities.

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