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Monday, February 24, 2014

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Feb 21, ‘14

S&P 500 Index Chart

S&P 500_Feb2114

In a holiday-shortened week, the 6 months bar chart pattern of S&P 500 consolidated sideways and closed marginally lower for the week. The Jan ‘14 top of 1851 was tested twice without getting breached. All three EMAs are rising with the index trading above them.

The consolidation should help bulls to gather strength to push the index to a new lifetime high. However, volumes remain a concern. On the two down-days during the week, volumes were higher. Is the ‘smart money’ using the rally to bail out?

Daily technical indicators are looking bullish. MACD is rising above its signal line in positive territory. RSI is moving sideways above its 50% level. Slow stochastic is inside its overbought zone, but slipping a little. Stay invested.

Economic news continues to be mixed. Housing starts and existing home sales dipped – but blame it on the unusually harsh winter. Rail traffic has softened. Initial claims of unemployment was slightly higher than expected at 336,000. Manufacturing data was a bit more encouraging.

FTSE 100 Index Chart

FTSE_Feb2114

The following were the concluding comments in last week’s analysis of the daily bar chart pattern of FTSE 100: “Technical ‘health’ of the chart has been restored. Time to add to existing holdings.” The index sailed past the 6700 and 6800 levels before pausing just short of the Jan ‘14 top of 6867.

All three EMAs are rising and the index is trading above them. Bulls will regain complete control after the index crosses above its Jan ‘14 top. Some correction/consolidation is possible before that.

Daily technical indicators are bullish, but looking overbought. MACD is rising above its signal line and is just below the edge of its overbought zone. RSI and Slow stochastic are well inside their respective overbought zones, with the Slow stochastic showing signs of slowing upward momentum.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 indices have recovered from sharp bull market corrections, and look ready to climb higher. Both indices are very close to previous tops. Some caution is advised. Stay invested, but maintain stop-losses.

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