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Monday, June 9, 2014

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jun 06, ‘14

S&P 500 Index Chart

S&P 500_Jun0614

The 6 months daily bar chart pattern of S&P 500 consolidated a bit near its previous week’s high of 1924 before charging up towards the 1950 level – stopping just half a point short. Another week – another new high. To paraphrase an old song by Ace: How long will this be going on?

Technical indicators have been ‘flashing red’ for a while, with all three inside their overbought zones. Volumes have been moderate and sliding. The index is trading more than 40 points above its 20 day EMA. The vertical distance between the 50 day and 200 day EMAs is increasing.

All of the above point to an overbought market that is ripe for a correction. But a market can remain overbought for long periods. So, no need to sell in a hurry. But partial profit booking is always a good idea when a market is at a lifetime high.

It’s a bull market. Stay invested with a trailing stop-loss and enjoy the ride.

FTSE 100 Index Chart

FTSE_Jun0614

The 6 months daily bar chart pattern of FTSE 100 has been consolidating sideways within a ‘symmetrical triangle’ pattern after touching a high of 6895 on May 15. Triangles tend to be continuation patterns, so the eventual break out should be upwards.

However, triangles are unreliable. So, it is better to wait for the eventual break out before taking a buy/sell decision. All three EMAs are rising, and the index is trading above them in a bull market. Corrections and consolidations improve the technical ‘health’ of stock charts and provide them ‘energy’ to move higher.

Daily technical indicators are in downtrends, but not looking too bearish. MACD is sliding below its signal line in positive territory. RSI and Slow stochastic have moved up to their respective 50% levels after falling below them.

A break out can occur at any time. An upward break out should be accompanied by a volume spurt to validate the break out. Stay invested.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 are in long-term bull markets. S&P 500 reached another new lifetime high. FTSE 100 is consolidating within a triangle after touching a new lifetime high last month. Book partial profits, or stay invested with trailing stop-losses.

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