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Monday, December 8, 2014

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Dec 05, ‘14

S&P 500 Index Chart

SPX_Dec0514

The daily bar chart pattern of S&P 500 dropped briefly below the 2050 level on Mon. Dec 1 ‘14, but rose to touch new intraday (2079) and closing (2075) highs on Fri. Dec 5 ‘14. However, the index failed to move above the upper resistance line of the ‘broadening top’ pattern (re-drawn last week).

Monday’s down-day volumes were the highest during the week. The rally during the rest of the week was accompanied by sliding volumes. The index is trading above its three rising EMAs in a long-term bull market, but the bear threat will remain as long as the index trades within the ‘broadening top’ pattern.

Daily technical indicators are still looking overbought, and are showing negative divergences by failing to touch new highs with the index. MACD is sliding below its signal line inside overbought territory. RSI is moving sideways – just below its overbought zone. Slow stochastic has re-entered its overbought zone after dropping below it.

On longer term weekly chart (not shown), the index touched new intra-week and closing highs, and is trading well above its three weekly EMAs in a long-term bull market. Weekly technical indicators are looking overbought, and showing negative divergences by failing to touch new highs with the index. Caution is advised - the ‘broadening top’ can lead to a sharp correction.

FTSE 100 Index Chart

FTSE_Dec0514

The daily bar chart pattern of FTSE 100 underwent a second week of sideways consolidation but managed to stay above its 200 day EMA in bull territory. The index closed above the 6700 level and gained a modest 20 points for the week.

The 20 day EMA has crossed above the 200 day EMA. The 50 day EMA is gradually rising, but is yet to cross above the 200 day EMA. So, the technical confirmation of a return to a bull market is still awaited.

Daily technical indicators have corrected overbought conditions, but remain in bullish zones. Note the bearish ‘rounding top’ patterns formed by the MACD signal line and Slow stochastic %D line. The index may not be able to stay above its 200 day EMA much longer.

On longer term weekly chart (not shown), the index slipped below its entangled 20 week and 50 week EMAs, but managed to close above its three weekly EMAs. Weekly technical indicators are looking bullish, but their upward momentum is slowing down. MACD is still in negative zone. RSI is moving sideways above its 50% level. Slow stochastic has reached the edge of its overbought zone. The index overcame a strong bear attack to return to a long-term bull market, but continues to face technical headwinds in the near term.

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