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Monday, July 8, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jul 05, ‘13

S&P 500 Index Chart

S&P 500_Jul0513

The daily bar chart pattern of S&P 500 index went through a smart correction that dropped from an intra-day high of 1687 to an intra-day low of 1560 – a 7.5% correction from the top that dropped the index below its 20 day and 50 day EMAs. An expected test of the rising 200 day EMA didn’t happen.

The rally from the Jun ‘13 low of 1560 touched a high of 1632 on Fri. Jul 5 – easily moving above the support/resistance level of 1600 and retracing more than 50% of the recent fall that pushed the index back into bull territory. However, down-day volumes continue to be strong – which is an indication that bears may be lurking around the corner.

Daily technical indicators are looking bullish. MACD is rising above its signal line, and seems ready to enter positive territory. RSI has moved above its 50% level. Slow stochastic has risen sharply above its 50% level, and is heading towards its overbought zone.

The long-term bull market is intact, though there may be some short-term volatility. The US economy continues its slow recovery – as can be ascertained from improving employment numbers and growth in light vehicle sales.

FTSE 100 Index Chart


The 6 months daily bar chart pattern of FTSE 100 index dropped below all three EMAs into bear country, but the support level of 6000 (mentioned two weeks back) held. The index rallied smartly above all three EMAs and almost reached the 6500 level before dropping down to close exactly on the 20 day EMA.

The index has retraced more than 50% of its corrective fall from the May ‘13 top of 6876 to the Jun ‘13 bottom of 6023, and is back in a bull market. Strong volumes on down-days remains a concern though.

Daily technical indicators are turning bullish. MACD is negative, but rising above its signal line. RSI has moved above its 50% level. Slow stochastic is also above its 50% level and climbing towards its overbought zone.

The UK economy avoided a double-dip recession (as per revised figures) and is expected to grow strongly in 2 years.

Bottomline? The 6 months daily bar chart patterns of S&P 500 and FTSE 100 indices have recovered smartly from sharp corrections and are back in long-term bull markets. Stay invested, and use dips to add.

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