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Monday, February 2, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jan 30, 2015

S&P 500 Index Chart


The daily bar chart pattern of S&P 500 has been consolidating sideways in a rectangular band between 1988 and 2064 during the month of Jan ‘15. In the process, the index has dropped below the large ‘rising wedge’ pattern, and also below its 20 day and 50 day EMAs.

Note that the 20 day EMA is about to cross below the 50 day EMA for the first time since the beginning of Oct ‘14. Volumes have been rising during the past week, with higher volumes on down days.

A ‘rectangle’ pattern is usually a continuation pattern. Since the index entered the pattern after falling from a lifetime high of 2094 on Dec 29 ‘14, the expected break out is below the 1988 level. However, ‘rectangle’ patterns tend to be unreliable. So, it is advisable to wait for the break out before initiating any buy/sell decision.

Daily technical indicators are looking bearish, and showing increasing downward momentum. MACD has crossed below its signal line in negative territory. RSI has dropped below its 50% level. Slow stochastic is falling sharply towards its oversold zone.

The index is trading above its rising 200 day EMA in a long-term bull market. A possible break down below the rectangular band may lead to a test and likely breach of the long-term moving average.

On longer term weekly chart (not shown), the index dropped and closed below its 20 week EMA, but stayed above its rising 50 week and 200 week EMAs in a long-term bull market. All three weekly technical indicators are showing increased downward momentum. MACD and Slow stochastic are still in bullish zones, but RSI has slipped below its 50% level. Some more correction is likely.

FTSE 100 Index Chart


The daily bar chart pattern of FTSE 100 touched an intraday high of 6865 on Jan 27 ‘15, but formed a ‘reversal day’ pattern and started to pullback towards the large ‘symmetrical triangle’ pattern. The possibility of such a pullback after an upward break out was mentioned in last week’s analysis.

Note that the index is receiving some support from the 6750 level, which happens to be the top touched in Dec ‘14. The pullback is providing a buying opportunity.

The 20 day EMA has crossed above the 200 day EMA. The awaited ‘golden cross’ of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market.

Daily technical indicators are correcting overbought conditions, but remain in bullish zones. MACD has turned down inside its overbought zone. RSI is falling towards its 50% level. Slow stochastic is sliding down inside its overbought zone.

On longer term weekly chart (not shown), the index is trading above its three weekly EMAs in a long-term bull market. Weekly technical indicators are looking bullish. The index is getting ready to scale new heights.

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