Monday, January 19, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jan 16, 2015

S&P 500 Index Chart


The daily bar chart pattern of S&P 500 breached the lower support line of the ‘rising wedge’ pattern for the second time in two weeks. This time, it remained below the wedge – though it did attempt a pullback on the last day of the week.

A break down from a bearish pattern is often followed by a pullback towards the pattern. It provides a selling opportunity to those who may have missed selling on the break below the wedge pattern.

Can the index make another recovery and re-enter the wedge from below? The 3% ‘whipsaw’ rule says it can. But the falling 20 day and 50 day EMAs may prevent that from happening.

Technically, the index is trading above its rising 200 day EMA. So, the bull market is still intact. It is possible that the index may consolidate sideways for a while without dropping below its long-term moving average.

Daily technical indicators are in bearish zones. MACD is falling below its signal line in negative territory, and showing negative divergence by touching a lower bottom. RSI is trying to move up towards its 50% level. Slow stochastic has entered its oversold zone.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA for the second week in a row but just 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. Remain on the sidelines till a clearer picture emerges.

FTSE 100 Index Chart


The daily bar chart pattern of FTSE 100 slipped briefly below the 6300 level, but recovered to close above its 20 day and 50 day EMAs. However, it failed to test its sliding 200 day EMA and spent another week in bear territory.

Daily technical indicators are showing some bullish signs. MACD has crossed above its signal line in negative territory. RSI has moved above its 50% level. Slow stochastic is trying to cross above its 50% level. The index may attempt to test resistance from its 200 day EMA.

The index continues to trade within a large ‘symmetrical triangle’ pattern since touching a high of 6905 on Sep 4 ‘14. A convincing move above 6700 will cause an upward break out from the ‘symmetrical triangle’.

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 falling 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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