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Monday, October 13, 2014

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Oct 10, ‘14

S&P 500 Index Chart

S&P 500_Oct1014

Bears tightened their hold on the daily bar chart pattern of S&P 500. Any hope of a recovery by bulls was belied on the first day of the week. The index rose to touch an intra-day high of 1978, but faced resistance from its falling 20 day EMA, and formed a ‘reversal day’ pattern.

Attempts to rally on Wed. and Thu. by bulls were also thwarted by the falling 20 day EMA, which crossed below the 50 day EMA for the first time in 8 months. The index dropped on rising volumes to close the week at 1906 – losing 3% for the week and testing the Aug ‘14 low of 1905.

Daily technical indicators are bearish and a bit oversold. MACD has dropped inside its oversold zone. RSI is falling towards its oversold zone. Slow stochastic has re-entered its oversold zone after a brief bounce up. A breach of the 200 day EMA appears imminent.

On longer term weekly chart (not shown), the index closed below its 20 week EMA for the first time in 6 months, but is trading above its rising 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are looking bearish and showing downward momentum. The correction may continue a bit longer, and test support from the 50 week EMA (at 1878).

FTSE 100 Index Chart

FTSE_Oct1014

The following bearish signals were observed in last weeks’ analysis of the daily bar chart pattern of FTSE 100: “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.”

A brief attempt at a rally by bulls stopped short of the 6600 level. The index continued to fall through the week, and closed at a 52 week low of 6340. The ‘death cross’ has technically confirmed a bear market. That means every rise may be used by bears to sell.

Daily technical indicators are inside their respective oversold zones – so an upward bounce can occur at any time. At the time of writing this post, FTSE is trading about 25 points higher.

On longer term weekly chart (not shown), the index closed well below its 20 week and 50 week EMAs, but is trading above its 200 week EMA. Weekly technical indicators have dropped deeper inside bearish zones. The long-term bull market is under threat.

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