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Tuesday, January 1, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Dec 31, ‘12

S&P 500 Index Chart

S&P 500_Dec3112

2012 turned out to be a good year for the S&P 500 index, despite the painfully slow growth of the US economy. The index touched a 3 years intra-day high of 1475 in Sep ‘12 before forming a triple-top reversal pattern and going into a corrective mode.

In the previous post on the daily bar chart pattern of S&P 500 index, the resistance zone between 1420 and 1440 had proved a tough hurdle for bulls. The index dropped below the 1400 level before bouncing back inside the resistance zone on hopes of a resolution of the ‘fiscal cliff’ issues.

Daily technical indicators are giving mixed signals. MACD is positive, but has crossed below its signal line. RSI slipped below its 50% level, but has crept back up. Slow stochastic has fallen sharply below its 50% level.

The index may continue to consolidate near the resistance zone between 1420 and 1440 till the issues related to the ‘fiscal cliff’ are satisfactorily resolved.

FTSE 100 Index Chart

FTSE_Dec3112

2012 was a volatile year for the FTSE 100 index, thanks to a double-dip recession in the UK economy followed by an almost imperceptible recovery. The index dropped sharply below its 200 day EMA in May ‘12, before gradually recovering all its losses during the rest of the year.

For the past couple of weeks, the 1 year daily bar chart pattern of the FTSE 100 index has been struggling to cross the resistance zone between 5950 and 6000 – but without much luck. The index had corrected sharply after forming a triple-top reversal pattern during the first half of 2011 and haven’t yet recouped all its losses.

Daily technical indicators are looking bearish, which means the correction from the 6000 level is not quite over. MACD is positive, but has crossed below its signal line. RSI has dropped to its 50% level. Slow stochastic formed a head-and-shoulders like reversal pattern inside its overbought zone before plummeting below its 50% level.

A drop below the 50 day EMA and a test of support from the rising 200 day EMA is a possibility.

Bottomline? One year daily bar chart patterns of S&P 500 and FTSE 100 indices are struggling to overcome resistance zones. Some consolidation/correction can be expected before resistance zones are crossed. Both indices are in bull markets. Hold, or use dips to add.

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