Stock Index Chart Patterns: S&P 500 and FTSE 100 – Sep 26, ‘14

S&P 500 Index Chart

Last week, the 6 months daily bar chart pattern of S&P 500 had touched a new high of 2019 on Fri. Sep 19 ‘14, but formed a ‘reversal day’ pattern with a strong surge in volumes. Another bearish sign was negative divergences visible on all three technical indicators.

The following warning note was sounded: “If the index drops below its recent low of 1980, a bearish ‘broadening top’ pattern will get formed – in which case, a possible test of the Aug ‘14 low of 1905 will be on the cards.”

The index dropped below the bearish ‘broadening top’ and its 50 day EMA on Thu. Sep 25 ‘14, but bounced up above the 50 day EMA by the end of the week. At the time of writing this post, the index has again dropped below its 50 day EMA. A test of the Aug ‘14 low of 1905 is now a possibility.

Daily technical indicators are looking bearish. MACD is falling below its signal line, and is about to enter negative territory. RSI has dropped below its 50% level. Slow stochastic has dropped inside its oversold zone.

On longer term weekly chart (not shown), the index is seeking support from its 20 week EMA, but is trading above all three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones but showing downward momentum. Some more correction is likely.

FTSE 100 Index Chart

Last week, the 6 months daily bar chart pattern of FTSE 100 looked technically poised to move higher. Instead, the index dropped sharply below its three EMAs and the 6700 level into bear territory.

After a brief pullback to its 200 day EMA, which brought bears to the fore, the index dropped and closed below the 6650 level for the week. The good news for bulls is that the index touched a higher bottom than the one touched in Aug ‘14.

The bad news is that all three technical indicators are bearish, and two of them – RSI, Slow stochastic – are showing negative divergences by touching lower bottoms. That means, the correction may not be over yet.

On longer term weekly chart (not shown), the index dropped sharply below its 20 week and 50 week EMAs, but is trading well above its 200 week EMA in a long-term bull market. Weekly technical indicators are turning bearish.