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Monday, March 25, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Mar 22, ‘13

S&P 500 Index Chart

S&P 500_Mar2213

The 6 months daily bar chart pattern of S&P 500 index spent a week in sideways consolidation – just below its all-time high of 1567. The 20 day EMA provided good support to the index. Higher volumes on down days remain a concern for bulls.

Despite the brief consolidation, the index is trading more than 100 points above its 200 day EMA. Such a wide gap between the index and its long-term moving average has been unsustainable in the past. As long as the index trades above its three rising EMAs, stay invested and enjoy the ride.

Daily technical indicators look bullish, after correcting from overbought conditions. MACD has slipped below its signal line in positive territory. RSI is above its 50% level. Slow stochastic has dropped to the edge of its overbought zone.

The economy is slowly improving – if you believe the jobs data. Read a contrarian view here.

FTSE 100 Index Chart

FTSE_Mar2213

Negative divergences were observed in all three technical indicators in last week’s analysis of the 6 months daily bar chart pattern of FTSE 100. The index sought support from its 20 day EMA, but dropped below its short-term moving average and the 6400 level by the end of the week.

Is this the beginning of the end of the bull rally? Daily technical indicators don’t seem to suggest that yet. MACD is falling below its signal line, but remains in positive territory. RSI has bounced up from its 50% level. Slow stochastic has dropped to its 50% level.

A bailout package for Cyprus has been agreed upon by the EU. That should calm bearish jitters for now.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 are undergoing correction/consolidation after touching new bull market highs. There are no immediate threats to the bull markets, which are riding a flood of liquidity from QE programs. Stay invested, with suitable trailing stop-losses.

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