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Monday, August 20, 2012

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Aug 17, ‘12

S&P 500 Index Chart

S&P 500_Aug1712

The 6 months daily closing chart pattern of the S&P 500 index clearly shows that bulls are in no mood to relent. After the briefest of hesitation near its May ‘12 top, the index soared up to test its Apr ‘12 top before taking a breather.

Note that the index, its 20 day and 50 day EMAs are moving up and away from the 200 day EMA with each passing day, increasing the probability of a correction at any time. VIX - the volatility (or fear) index – is now at its lowest point in the past 5 years. In the past, a low point of the VIX has corresponded with a peak in the S&P 500 index.

Technical indicators are bullish, but there are signs of slowing upward momentum. MACD is positive and above its signal line, though the histogram is falling. RSI found resistance from the edge of its overbought zone, and dipped down a bit. Slow stochastic is well inside its overbought zone, and showing no signs of coming down.

There is a possibility that the index may form a double-top reversal pattern – but the reversal can be confirmed only if the index falls below its Jun ‘12 low. Note the gradually falling volumes during the past month, which is not conducive to sustainability of the rally. Wait for a decent correction to enter.

FTSE 100 Index Chart

FTSE_Aug1712

The 6 months daily closing chart pattern of the FTSE 100 index spent the entire week consolidating sideways near its Apr ‘12 top. Both the index and the 20 day EMA are trading well above the 200 day EMA. A correction may be round the corner.

Technical indicators are bullish, but showing definite signs of losing upward momentum. MACD is positive and above its signal line, but has started falling. RSI is above its 50% level, but drifting sideways. Slow stochastic has started descending and may drop below its overbought zone.

The index is technically in a bull market, so a sharp correction can be used to enter.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are showing some hesitancy near their Apr ‘12 tops. Both indices are in bull markets – despite the weakness in the respective economies. Any sharp correction down to the 20 day or 50 day EMAs can be adding opportunities.

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