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Monday, April 22, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Apr 19, ‘13

S&P 500 Index Chart

S&P 500_Apr1913

Last week, negative divergences in all four daily technical indicators that failed to touch new highs, and tepid volumes had pointed to some more correction or consolidation. The 6 months daily bar chart pattern of S&P 500 index shows a quick drop to test support from the 50 day EMA, followed by a bounce.

The index closed 2.1% lower for the week. More ominously, the volumes on the three down days during the week were higher than the two up days. A sign of distribution? Daily technical indicators are showing bearish signs. MACD is positive, but falling below its signal line. RSI is trying to regain its 50% level after dropping below it. ROC has moved up to the ‘0’ line after a dip inside negative territory. Slow stochastic is below its 50% level.

The index is trading well above its rising 200 day EMA, which is the sign of a bull market. Such dips are adding opportunities. However, strict stop-losses must be maintained to protect profits.

Initial claims for unemployment rose slightly. Consumer confidence has weakened. Retail sales slipped. So did new home sales. Manufacturing index dipped. The jobless economic recovery still has a long way to go.

FTSE 100 Index Chart

FTSE_Apr1913 em

The 6 months daily bar chart pattern of FTSE 100 index dropped and stayed below its 50 day EMA, closing 1.5% lower for the week. Though the index is trading above its rising 200 day EMA, it has been in a down trend since touching an intra-day high of 6534 on Mar 12 ‘13.

The good news for bulls is that the Apr 5 ‘13 intra-day low of 6214 has not been breached yet. But that may be a temporary respite. The 20 day EMA is about to cross below the 50 day EMA, and both have started to move down.

Daily technical indicators are bearish. MACD is falling below its signal line in negative territory. RSI is below its 50% level. ROC bounced up from its oversold zone, but remains negative. Slow stochastic is just above its oversold zone. The down trend may continue.

Will exports save UK’s economy from a triple-dip recession? The answer will be known later this week when GDP number is announced.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 indices are undergoing corrections. 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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