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Monday, May 19, 2014

Stock Index Chart Patterns: S&P 500 and FTSE 100 – May 16, ‘14

S&P 500 Index Chart

S&P 500_May1614

The 6 months daily bar chart pattern of S&P 500 continued its up move by using its 50 day EMA as support. On Tue. May 13, the index reached new lifetime highs on intra-day (1902) and closing (1897) basis. The index closed at the same level as its previous Apr 4 top and 6 points higher than its previous highest (Apr 2) closing level. Not a convincing breach of its previous tops.

Volumes leading up to the new highs were sliding and the index failed to sustain near its new highs for long. Profit booking quickly dropped the index to its 50 day EMA. Though the index managed to bounce up on Fri. May 16, down-day volume on Thu. May 15 was the highest during the week.

Daily technical indicators are in bullish zones but looking weak. MACD has crossed below its signal line in positive territory. RSI bounced up weakly from its 50% level. Slow stochastic is hurtling down towards its 50% level. A drop below the 50 day EMA is a possibility. Maintain a stop-loss at 1850 and stay invested.

On longer term weekly chart (not shown), all three weekly EMAs are rising and the index is trading above them. Weekly technical indicators are in bullish zones but showing negative divergences by touching lower tops. Be prepared for some correction or consolidation.

FTSE 100 Index Chart

FTSE_May1614

Bulls appear to have regained control of the 6 months daily bar chart pattern of FTSE 100. The index closed at a lifetime high of 6878 on Wed. May 14. The very next day, the index touched a new lifetime intra-day high of 6895, but formed a ‘reversal day’ pattern (higher high, lower close) and dropped below the 6850 level.

By the end of the week, the index managed to close above the 6850 level backed by strongest volumes in a month. Daily technical indicators are looking overbought and two of them – MACD and RSI – are showing negative divergences by touching lower tops.

Some correction/consolidation can be expected after an index touches new highs. On longer term weekly chart (not shown), the index has formed a large ascending triangle pattern from which a convincing upward break out can take the index past the 7500 mark.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 are in long-term bull markets, and correcting a bit after touching new lifetime highs. The dips can be used to add to existing holdings. Alternatively, stay invested with suitable stop-losses.

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