Monday, December 2, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Nov 29, ‘13

S&P 500 Index Chart

$SPX - StockCharts-001-001

In a curtailed trading week due to the Thanksgiving holiday, the 6 months daily bar chart pattern of S&P 500 inched up to new lifetime intra-day and closing highs (of 1813 and 1806) on Nov 29 ‘13. The index is trading more than 150 points above its 200 day EMA, and seems to be defying gravity.

In last week’s analysis, the formation of a bearish ‘rising wedge’ pattern was mentioned. The index continues to trade within the ‘wedge’ and looks ready for a steep correction. Volumes are sliding. Daily technical indicators are looking overbought and showing negative divergences by failing to touch new highs with the index.

The economy continues to show improvement, but in fits and starts. Housing market is showing signs of life. Initial claims of unemployment are falling. But durable goods orders slipped after 2 months of increases.

An index can remain overbought for long periods. But prudence demands that some profits should be taken off the table. Alternatively, maintain a trailing stop-loss and enjoy the ride while it lasts.

FTSE 100 Index Chart


The 6 months daily bar chart pattern of FTSE 100 is still correcting in a bull market by touching lower tops. So far, the 50 day EMA has provided very good support. But that could not prevent the index from its 4th straight lower weekly close.

There was a sharp increase in volumes on Tuesday’s down-day. Daily technical indicators are looking bearish. MACD is falling below its signal line, and about to enter negative territory. Both RSI and Slow stochastic are below their respective 50% levels. A drop below the 50 day EMA is likely.

Bottomline? 6 months daily bar chart patterns of S&P 500 closed at a new life-time high. But a bearish ‘rising wedge’ pattern and negative divergences in technical indicators are concerns for bulls. FTSE 100 is still undergoing a bull market correction. Stay invested but maintain suitable stop-losses.

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