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Monday, January 14, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jan 11, ‘13

S&P 500 Index Chart

S&P 500_Jan1113

The 6 months daily bar chart pattern of the S&P 500 index has recovered all its losses from the Nov ‘12 low following the triple-top reversal pattern. The index is poised near its Sep ‘12 top, and should move up to touch a new 52 week high.

All three EMAs are rising and the index is trading above them. The bulls are back in control. But volumes are drifting down as the index is moving up. That is a concern. Also, the gaps between the EMAs are widening – which is a sign that the index is becoming overbought.

Daily technical indicators are bullish. MACD is positive and rising above its signal line. RSI is moving sideways below its overbought zone. Slow stochastic is inside its overbought zone.

A bit of correction or consolidation will improve the technical health of the chart, and enable bulls to make an attempt at testing the all-time high touched back in Oct ‘07.

FTSE 100 Index Chart

FTSE_Jan1113

The 6 months bar chart pattern of the FTSE 100 index consolidated for a couple of days before moving up to cross the 6100 level. In doing so, it crossed above the triple-top reversal pattern formed during Feb-Jul ‘11 (not shown in chart) and touched a 3 year high.

All three EMAs are rising and the index is trading above them. However, this isn’t a time of euphoria, but of caution. The index is trading more than 300 points above its 200 day EMA, which is a sign of an overbought condition.

Daily technical indicators are bullish, but looking overbought. MACD is positive and rising above its signal line, but has entered overbought territory. RSI has re-entered its overbought zone, where it doesn’t like to stay for long. Slow stochastic is well inside its overbought zone.

Some correction/consolidation is likely, which will help the index to attempt a test of its 2007 high.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 indices have overcome resistance zones, and look all set to move up to test their 2007 highs. However, the up moves may be preceded by some correction/consolidation. Hold, with suitable trailing stop-losses.

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