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Monday, February 18, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Feb 15, ‘13

S&P 500 Index Chart

S&P 500_Feb1513

The daily bar chart pattern of S&P 500 index touched another new high mid-week, but drifted sideways thereafter. Friday’s (Feb 15) down-day volumes were the highest during the week. That could be a sign of distribution.

All three daily technical indicators failed to touch new highs with the index. The combined negative divergences, and the current state of the indicators close to, or inside, their overbought zones are hinting at a correction. But the sheer flood of liquidity is continuing to push the index higher.

Economic news remain mixed. Industrial production slipped a bit. But retail sales rose and unemployment claims fell more than expectations. Another recession may be off the table, but growth is painfully slow.

Hold, with a trailing stop-loss at the rising 20 day EMA.

FTSE 100 Index Chart

FTSE_Feb1513

The daily bar chart pattern of FTSE 100 index had bounced up after testing support from its 20 day EMA on Fri. Feb 8. Last week, it rose to another new high of 6385 on Wed. Feb 15 ‘13.

However, all three daily technical indicators touched much lower tops – the combined negative divergences led to an immediate correction. The bull market is intact but showing signs of topping out.

Should the index fall below its Feb 7 low of 6217, a bearish ‘widening top’ pattern (higher highs, lower lows) would form. QE3 may turn technical analysis on its head – as easy availability of cheap funds can continue to push the index higher.

Hold, with a trailing stop-loss at the rising 20 day EMA.

Bottomline? The daily bar chart patterns of S&P 500 and FTSE 100 continue to touch new highs on a flood of liquidity. There is no point in doubting the duration or sustainability of the rallies. Stay invested, but maintain trailing stop-losses.

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