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Monday, April 15, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Apr 12, ‘13

S&P 500 Index Chart

S&P 500_Apr1213

The following were the concluding comments in last week’s analysis of the 6 months daily bar chart pattern of S&P 500 index: “…the market was looking for an excuse to sell after touching an all-time high. The index is in a bull market. Such dips provide adding opportunities.”

The index gained more than 2% for the week and touched a new high of 1597 on Thu. Apr 11 ‘13, but closed at 1589 by the end of the week. Profit booking emerged  due to lower than expected retail sales in March.

Daily technical indicators are looking bullish, but all four are showing negative divergences by failing to touch new highs with the index. Volumes have not been great either. Some correction/consolidation may be on the cards.

Initial claims for unemployment dropped. Continuation of QE3 was another positive for the bulls. However, consumer sentiment index was lower than expectations.

FTSE 100 Index Chart

FTSE_Apr1213

The 6 months daily bar chart pattern of FTSE 100 index shows a spirited rally by the bulls that took the index above all three EMAs and the 6400 level.

Though the index gained more than 2% on a weekly closing basis, it slipped below the 6400 level. A bearish pattern of lower tops and lower bottoms means the down trend that started after the index touched a high of 6534 on Mar 12 ‘13 is now a month old.

Daily technical indicators failed to enter their respective bullish zones. MACD is negative and below its signal line. RSI managed to reach its 50% level, but has flattened out. ROC briefly entered positive territory, only to slip down to its ‘0’ line. Slow stochastic climbed up to its 50% level but its upward momentum is waning.

UK economy is stagnating, but rise in factory output may prevent a triple-dip recession.

Bottomline? The S&P 500 index is facing profit-booking after touching another all-time high. FTSE 100 is in the midst of a month-long down trend. Both indices are trading above their rising 200 day EMAs, and are in bull markets. Stay invested, but tighten stop-losses to protect profits.

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