Amazon deals

Monday, March 11, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Mar 08, ‘13

S&P 500 Index Chart

S&P 500_Mar0813

The 6 months daily bar chart pattern of S&P 500 appears to have shaken off the bears, as it rose to another new high. It is just 1% below its all-time high touched back in 2007. Volumes have not been great. That puts a question mark on the sustainability of the rally.

Daily technical indicators are looking bullish but a little overbought. MACD has crossed above its signal line and started rising in positive territory. RSI has moved up close to the edge of its overbought zone. Slow stochastic is well inside its overbought zone.

Note that MACD and RSI failed to touch higher tops. The negative divergences may lead to some consolidation or correction. Another concern for the bulls is the widening gap between the index and its rising 200 day EMA.

A promising jobs report seems to have encouraged bulls. Addition to non-farm payrolls was higher than expectation. Particularly heartening was the increase in construction jobs. Initial unemployment claims dropped. Overall unemployment percentage also came down from 7.9% to 7.7%.

What may have slipped through the cracks of government statistics is the large number of people who have dropped out of the job market because they just can’t find any employment. People are also working less hours in their jobs.

FTSE 100 Index Chart

FTSE_Mar0813

The 6 months bar chart pattern of FTSE 100 index has broken out of its sideways consolidation range, and moved up to touch a new high.

Daily technical indicators are looking bullish. MACD has crossed above its signal line in positive territory, and reversed its falling trend. RSI is moving up towards its overbought zone. Slow stochastic has entered its overbought zone.

Note that all three indicators are showing negative divergences by failing to reach new highs with the index. The gap between the index and its rising 200 day EMA continues to grow wider. These are worrying signs for bulls.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 have risen to touch new bull market highs. Negative divergences in daily technical indicators and widening gaps between the indices and their long-term moving averages do not augur well for bulls. Stay invested and enjoy the rally – but maintain trailing stop-losses.

No comments: