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Monday, September 23, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Sep 20, ‘13

S&P 500 Index Chart

S&P 500_Sep2013

The 6 months daily bar chart pattern of S&P 500 soared past its Aug ‘13 top of 1710 to touch a life-time high of 1730 on Sep 19. But the index formed a ‘reversal day’ pattern (higher high, lower close) and dropped down to the 1710 level on huge volumes. Previous tops often act as support levels. But 1710 may get breached, as Fridays large volumes means that bears will be active.

Bernanke’s decision to hold off on QE3 tapering surprised the market, and bulls went on a rampage in global markets at the thought of a longer period of cheap and easy liquidity. By the end of the week, the euphoria abated. Realisation dawned that the economy wasn’t growing as well as expected.

Daily technical indicators are bullish, but showing signs of weakening momentum. MACD is positive and above its signal line, but showing negative divergence by failing to touch a new high with the index. RSI has dropped from its overbought zone. Slow stochastic is inside its overbought zone, but failed to touch a new high and has started to slip down.

The bull market is intact, but facing another correction.

FTSE 100 Index Chart

FTSE_Sep2013 

The 6 months daily bar chart pattern of FTSE 100 is back in bull territory, but struggling to cross the 6600 level convincingly. Unless it can move above its Aug ‘13 top of 6700 – thereby forming a bullish pattern of higher tops and higher bottoms from the Jun ‘13 low – the index will continue to consolidate sideways.

Sharp rise in volumes on the two down-days last week is a sign of ‘distribution’. Bulls need to be prepared for another bear attack.

Daily technical indicators are bullish, but showing signs of weak upward momentum. MACD is positive and just above its signal line. RSI is oscillating in bullish zone. Slow stochastic has dropped from its overbought zone.

Bottomline? 6 months daily bar chart patterns of S&P 500 and FTSE 100 indices are in bull markets, but likely to encounter corrective moves. Hang on to existing holdings. The likely dips can be used to add very selectively.

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