Monday, October 6, 2014

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Oct 03, ‘14

S&P 500 Index Chart

S&P 500_Oct0314

Daily technical indicators were looking bearish in last week’s analysis of the daily bar chart pattern of S&P 500 index. Some more correction - and a possible test of the Aug ‘14 low of 1905 - was expected.

The index dropped sharply to touch an intra-day low of 1926 on Thu. Oct 2 ‘14, but bounced up to close near the day’s top – forming a ‘doji’ pattern (in candlestick parlance) that indicates indecision among bulls and bears.

A positive jobs report led to buying on the last day of the week that is a signal that the correction may be over. The index lost about 15 points for the week; but by touching a higher bottom of 1926, the index continued the bullish pattern of higher tops and higher bottoms.

Daily technical indicators are in bearish zones, but showing some signs of recovery. MACD is falling below its signal line in negative territory. RSI is trying to reverse its downtrend, but remains below its 50% level. Slow stochastic has emerged from its oversold zone.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA intra-week, 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. The index may consolidate a bit before resuming its up move.

FTSE 100 Index Chart


The following remarks appeared in last week’s analysis of the 6 months daily bar chart pattern of FTSE 100: “…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.”

The index dropped below its Aug ‘14 low and the 6500 level to an intra-day low of 6446 – its lowest level in 8 months – before closing above the 6500 level by the end of the week with a loss of 120 points.

The 20 day EMA has crossed below the 200 day EMA for the first time in more than 2 years. If the 50 day EMA also crosses below the 200 day EMA, the ‘death cross’ will technically confirm a bear market.

Daily technical indicators are looking bearish and oversold. MACD is falling below its signal inside its oversold zone. RSI has bounced up from its oversold zone. Slow stochastic is inside its oversold zone, but trying to turn up. At the time of writing this post, the index is trading about 47 points higher at 6575.

On longer term weekly chart (not shown), the index is well below its 20 week and 50 week EMAs, but is trading above its 200 week EMA in a long-term bull market. Weekly technical indicators have entered bearish zones. Bears may be getting the upper hand.

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