Monday, March 24, 2014

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

S&P 500 Index Chart

S&P 500_Mar2114

The daily bar chart pattern of S&P 500 recovered quickly from its previous week’s corrective move below its 20 day EMA. It rose to touch a new intra-day high on Mar 21 ‘14 that was marginally higher than its previous high touched on Mar 7 ‘14, but formed a ‘reversal day’ pattern with a big spurt in volumes.

All three technical indicators are in bullish zones, but showing negative divergences by touching lower tops. A consolidation or corrective move is likely. Has the index formed a ‘double top’ reversal pattern? Technically, the answer is ‘no’. Why?

First, the volume. The formation of the second top should be on lower volumes. Second, on a closing basis, the second top was much lower. Third, the index has not yet dropped below the ‘valley’ between the two tops. At the time of writing this post, the index is trading just a point higher.

All three EMAs are rising and the index is trading above them. The long-term bull market keeps charging ahead.

FTSE 100 Index Chart


The following remarks were made in last week’s analysis of the daily bar chart pattern of FTSE 100: “The index may pullback towards its 200 day EMA in an effort to return to bull territory. The dip is an adding opportunity.”

The index pulled back and crossed above its 200 day EMA and the 6600 level but could not remain in bull territory for long. It closed below its 200 day EMA for the second straight week but gained about 30 points.

Daily technical indicators are bearish, but beginning to correct oversold conditions. MACD is still falling below its signal line in negative territory, and is just above the edge of its oversold zone. RSI has bounced up from the edge of its oversold zone. Slow stochastic is trying to emerge from its oversold zone.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 indices are still in the midst of bull market corrections. S&P 500 is recovering from a sharp bear attack and is trading near its lifetime high. FTSE 100 is struggling to get out of a strong bear grip, but appears to have formed a higher bottom at about 6500. Stay invested.

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