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Monday, August 18, 2014

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Aug 15, ‘14

S&P 500 Index Chart

S&P 500_Aug1514

The 6 months daily bar chart pattern of S&P 500 appeared to be recovering from a strong bear attack last week. However, the following cautionary remark was made: “The index needs to move convincingly above 1960 to reverse the down trend that started from the Jul 24 top of 1991.”

Note that the index touched an intra-day high of 1964 on Fri. Aug 15 but slipped down to close marginally lower than the previous day – forming a ‘reversal day’ pattern supported by the highest volumes during the week.

The bad news for bulls is the failure to convincingly cross the 1960 level, and the formation of the ‘reversal day’ pattern could end the rally. The good news is that the index closed above all three EMAs in bull territory for a 23 points gain for the week. Also, by closing above 1948, the index has crossed the 50% Fibonacci retracement level of the fall from 1991 to 1905.

Daily technical indicators are turning bullish. MACD is negative, but has crossed above its signal line. RSI and Slow stochastic have moved above their respective 50% levels. The rally is likely to continue, but bears may remain active till the Jul 24 top of 1991 is crossed convincingly.

On longer term weekly chart (not shown), the index is trading above all three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones after correcting overbought conditions.

FTSE 100 Index Chart

FTSE_Aug1514

In last week’s analysis of the 6 months daily bar chart pattern of FTSE 100, daily technical indicators were looking bearish and a bit oversold. An upward bounce was expected at any time.

The index bounced up smartly above all three EMAs to an intra-day high of 6743 on Fri. Aug 15, but bears used the opportunity to sell. The index dropped below the 6700 level to close just above its 200 day EMA, with a decent gain of 120 odd points for the week.

That was the good news for bulls. The bad news is that the downtrend and bearish pattern of lower tops and lower bottoms since the May 15 top of 6895 still continues. MACD, RSI and Slow stochastic are moving up, but remain in bearish zones. Bears are in no mood to give up.

The previous top of 6834 needs to be crossed to break the bearish pattern of lower tops and lower bottoms. At the time of writing this post, FTSE is trading at 6738. Bulls have their work cut out.

On longer term weekly chart (not shown), the index has closed above its 50 week EMA but has failed to cross above its 20 week EMA. However, it is trading well above its rising 200 week EMA in a long-term bull market. Weekly technical indicators are looking bearish, but showing signs of turning around. 

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