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Monday, January 7, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jan 04, ‘13

S&P 500 Index Chart

S&P 500_Jan0413

The last-minute resolution of the ‘fiscal cliff’ provided renewed energy to the bulls. The one year bar chart pattern of the S&P 500 index jumped above the resistance zone between 1420 and 1440, backed by good volumes. That provided technical validity to the upward break out.

The index is hesitating near the ‘triple top’ reversal pattern formed during Sep-Oct ‘12. This is quite expected, as traders tend to remember levels from which a stock or index had reacted earlier. That is why support and resistance levels are important in technical analysis.

Since the index is in a bull market – note that it is trading above all three EMAs, which are rising – the previous top touched in Sep ‘12 should not halt the upward march. The all-time high touched in Oct ‘07 is likely to be tested and breached.

Daily technical indicators are looking quite bullish. MACD is rising above its signal line in positive territory. RSI is consolidating half-way between its 50% level and the edge of its overbought zone. Slow stochastic has entered its overbought zone.

Hold, with a trailing stop-loss. It is not a good idea to buy when the index is less than 10% below its all-time high.

FTSE 100 Index Chart

FTSE_Jan0413

The resolution of the ‘fiscal cliff’ in the US helped the one year bar chart pattern of FTSE 100 index to reverse its corrective move and cross above the resistance zone between 5950 and 6000. The index moved up to touch a 52 week high close to the 6100 level, which also happens to be near the level of the ‘triple-top’ reversal pattern formed during Feb-Jul ‘11.

It is likely that the index may consolidate or even correct a bit here before it can move above the 6100 level. Daily technical indicators are looking bullish but overbought. MACD has crossed above its signal line in positive territory, and about to enter its overbought zone. RSI has entered its overbought zone. Slow stochastic has risen sharply and is well inside its overbought zone.

The index is in a bull market, but close to a previous reversal level. Hold, with a trailing stop-loss.

Bottomline? One year daily bar chart patterns of S&P 500 and FTSE 100 indices have overcome resistance zones – thanks to the resolution of the US ‘fiscal cliff’. Both indices are near the levels of previous ‘triple top’ reversal patterns. Some consolidation or correction may precede the next up moves.

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