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Monday, October 20, 2014

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Oct 17, ‘14

S&P 500 Index Chart

S&P 500_Oct1714

Bears had tightened their grips and daily technical indicators were looking bearish in last week’s analysis of the daily bar chart pattern of S&P 500. A breach of the 200 day EMA appeared imminent.

The index easily breached its 200 day EMA on the first day of the week, and dropped all the way to 1820 on Wed Oct 15 ‘14 – wiping out all gains made in the last 6 months. By the end of the week, the index pulled back to its 200 day EMA but closed 12 points below in bear territory.

The sharp volume spurt during Wednesday’s low may be the sign of a ‘selling climax’ that has bearish implications if the index fails to regain at least 50% of its fall from the Sep ‘14 top of 2020 to 1820. That means, the index needs to rise above 1920 quickly to prevent bears from getting complete control.

Daily technical indicators are correcting oversold conditions, but remain in bearish zones. MACD is deep inside its oversold zone. RSI has bounced up after a brief visit inside its oversold zone. Slow stochastic has emerged from its oversold zone.

On longer term weekly chart (not shown), the index dropped below its 50 week EMA for the first time in 2 years, but managed to close above it. Weekly technical indicators are looking bearish and showing downward momentum. Some more correction is likely. The index is trading well above its rising 200 week EMA, so the long-term bull market is intact.

FTSE 100 Index Chart

FTSE_Oct1714

The following comments appeared in last week’s analysis of the daily bar chart pattern of FTSE 100: “The ‘death cross’ has technically confirmed a bear market. That means every rise may be used by bears to sell.”

A weak attempt at a rally by bulls barely took the index above the 6400 level. Bears started selling immediately. The index dropped below the 6100 level intra-day on a strong volume surge but recovered to close above the 6300 level by the end of the week with a small weekly loss of 30 points.

Daily technical indicators are bearish, but trying to correct oversold conditions. MACD is deep inside its oversold zone, but has stopped falling. RSI has bounced up from the edge of its oversold zone. Slow stochastic is trying to emerge from its oversold zone.

On longer term weekly chart (not shown), the index dropped below its 200 week EMA intra-week for the first time in more than 2 years, but managed to close well above it. Weekly technical indicators have dropped deeper inside bearish zones. The long-term bull market is under serious threat.

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