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Monday, January 12, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jan 09, 2015

S&P 500 Index Chart


Volumes increased on the first two days of the week, as the daily bar chart pattern of S&P 500 breached the lower support line of the ‘rising wedge’ pattern and dropped below the 2000 level. The possibility was mentioned in last week’s analysis.

Though the index closed below the wedge pattern for a day, it wasn’t a technically valid downward breach because the index remained within the 3% ‘whipsaw’ limit. The efficacy of the ‘whipsaw’ rule was demonstrated when the index bounced up to re-enter the wedge pattern.

The rally was short-lived. After crossing the 2060 level, the index reversed direction. At the time of writing this post, the index is testing support from the lower edge of the ‘rising wedge’ pattern. The support may not hold.

Daily technical indicators are turning bearish. MACD is below its signal line, and has entered its negative zone. RSI has slipped below the 50% level. Slow stochastic is just above its 50% level, but turning down.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA but managed to close above it and is trading above its three weekly EMAs in a long-term bull market. All three weekly technical indicators are in bullish zones but showing increasing downward momentum. Caution is advised.

FTSE 100 Index Chart


The daily bar chart pattern of FTSE 100 spent the entire week in bear territory. Good news for bulls were the higher bottom of 6329 touched by the index on Jan 6 and a close above the 20 day and 50 day EMAs on Jan 8. But these were small mercies.

Daily technical indicators are showing signs of bearishness. MACD is touching its signal line in negative zone. RSI and Slow stochastic are above their respective 50% levels, but are turning down. At the time of writing this post, the index has dropped below the 6500 level.

Since touching a high of 6905 on Sep 4 ‘14, the index has been consolidating sideways within a large symmetrical triangle pattern. A break down below the triangle will be very bearish. Maintain a strict stop-loss at 6200, if you are holding.

On longer term weekly chart (not shown), the index is trading well above its 200 week EMA in a long-term bull market, but has remained below its 20 week and 50 week EMAs. The 50 week EMA is forming a bearish ‘rounding top’ pattern. Weekly technical indicators are giving mixed signals. MACD and RSI are in bearish zones, but Slow stochastic is in bullish zone.

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