Monday, November 25, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Nov 22, ‘13

S&P 500 Index Chart

S&P 500_Nov2213

The 6 months daily bar chart pattern of S&P 500 index is showing good news and some bad news. First, the obvious good news. The index had a brief correction during the first three days of the week and then zoomed up to close above the 1800 level at a new lifetime high.

Now, the bad news. Volumes are gradually falling as the index is moving higher. All three daily technical indicators are looking overbought and showing negative divergences by failing to touch new highs. Most worrisome is the bearish ‘rising wedge’ pattern which the index is forming since the last week of Oct ‘13.

The index is showing signs of overheating. Before it lets off some serious steam, it may be a good idea to book partial profits.

Economic news continues to be encouraging, with retail sales growing, initial claims of unemployment falling and manufacturing index rising. But the housing market remains a concern.

FTSE 100 Index Chart


The 6 months daily bar chart pattern of FTSE 100 index consolidated sideways during the week and closed below the 6700 level. Though the index is in a bull market, the down trend that started from the Oct ‘13 top of 6820 is still ongoing.

The good news is that the index has not dropped below its 50 day EMA during Nov ‘13. The bad news is that the three daily technical indicators are turning bearish. The bulls may not be able to prevent a breach of the 50 day EMA.

MACD is falling below its signal line, and may soon enter negative territory. Both RSI and Slow stochastic are below their 50% levels and look ready to fall further. At the time of writing this post, the index is trying hard to move above the 6700 level.

Bottomline? 6 months daily bar chart patterns of S&P 500 closed at a new life-time high. Some partial profit booking may not be a bad idea. FTSE 100 is trying to recover from a bull market correction. Stay invested but maintain a stop-loss.

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