Monday, March 17, 2014

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

S&P 500 Index Chart

S&P 500_Mar1414

Note the following remarks from last week’s analysis of the daily bar chart pattern of S&P 500: “Bulls are clearly on top. But don’t expect the bears to give further ground without a fight. Several technical indications point to a correction.”

The index started to correct from Monday (Mar 10) and ended the week by falling sharply below its 20 day EMA on strong volumes – losing about 2% for the week. There is no immediate threat to the long-term bull market since the index is trading more than 100 points above its rising 200 day EMA.

Daily technical indicators are looking bearish. MACD is positive, but falling below its signal line. RSI has slipped below its 50% level. Slow stochastic has dropped below its 50% level. The correction may not be over yet. The dip can be used to add.

Initial jobless claims were lower than expectation, while retail sales revived somewhat in Feb ‘14. Both data points are indicative of a recovering economy.

FTSE 100 Index Chart


The daily bar chart pattern of FTSE 100 breached the support from its 50 day EMA and the 6700 level on Monday (Mar 10) and then fell sharply below its 200 day EMA – all the way down to the 6500 level before bouncing up a bit.

Daily technical indicators are looking oversold. MACD has dropped into negative territory below its falling signal line. RSI has reached the edge of its oversold zone. Slow stochastic has entered its oversold zone.

The index may pullback towards its 200 day EMA in an effort to return to bull territory. The dip is an adding opportunity.

Improving economic conditions in the eurozone – Britain's largest trading partner – and rising consumer demand drove output and orders higher in the first quarter of the year. However, Britain's trade position worsened in January, as diminishing demand for British goods abroad triggered a fall in exports.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 indices are in the midst of bull market corrections. Regular corrections enable indices to move higher. The dips are providing adding opportunities.

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