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Monday, July 22, 2013

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

S&P 500 Index Chart

S&P 500_Jul1913

The 1 year daily bar chart pattern of S&P 500 index shows the unfolding of a strong bull market despite the tepid growth of the US economy. Three rounds of Quantitative Easing helped the cause of the bulls. A strengthening Dollar added fuel to the bullish fire.

Periodic corrections on the way up has kept the technical health of the chart intact, and helped the index to touch a new life-time high. However, the index is looking overbought. A correction may be around the corner.

Daily technical indicators are looking bullish. MACD is rising above its signal line, and looks ready to enter its overbought zone. RSI is just below the edge of its overbought zone. Slow stochastic is well inside its overbought zone.

The index can remain in overbought conditions for long periods. But negative divergences in all three technical indicators – which failed to touch new highs with the index – may be indicating a period of correction or consolidation.

If the economy continues to grow – albeit slowly – a tapering of QE3 is likely. That is when the resilience of the bull market will be tested. Till then, stay invested, and use dips to add.

FTSE 100 Index Chart


The 1 year daily bar chart pattern of FTSE 100 index is back in a bull market after surviving a sharp bear attack that dropped the index below its 200 day EMA. The 20 day EMA has crossed above the 50 day EMA and the index is trading above all three EMAs.

Daily technical indicators are looking bullish. MACD is rising above its signal line in positive territory. RSI is just below its overbought zone. Slow stochastic is inside its overbought zone. Volumes have started picking up, which augurs well for the continuation of the rally.

The UK economy continues to suffer the pangs of a miserably slow GDP growth. The housing market is starting to recover and retail spending is on the rise, but business investment in the first quarter of 2013 was more than 16% lower than a year earlier.

Bottomline? One year daily bar chart patterns of S&P 500 and FTSE 100 indices overcame sharp bear attacks and are back in long-term bull markets. Stay invested; use dips to add.

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