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Monday, February 16, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Feb 13, 2015

S&P 500 Index Chart

SPX_Feb1315

The daily bar chart pattern of S&P 500 received good support from its rising 20 day EMA inside the rectangular band between 1988 and 2064 within which it was consolidating since the beginning of the year.

The index bounced up to test the upper edge of the rectangle, and then broke out upwards to reach a new lifetime high of 2097. All three EMAs are rising, and the index is trading above them in a long-term bull market.

Is it ‘game over’ for bears? It would seem so. However, note that the 117 points rally from the low of 1980 (touched at the beginning of this month) was accompanied by gradually sliding volumes. Bull rallies require volume support to sustain.

Also, the eventual upward break out above the ‘rectangle’ was not accompanied by a significant increase in volumes. That opens up the possibility of a pullback towards the top of the ‘rectangle’ – which can be used as an opportunity to add.

Daily technical indicators are looking a bit overbought. MACD is rising above its signal line in positive territory, and has just entered its overbought zone. RSI is steadily climbing towards its overbought zone. Slow stochastic is well inside its overbought zone.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market. All three weekly technical indicators are in bullish zones, and have reversed their downward momentum. (However, the index has been trading within a large bearish ‘rising wedge’ pattern since the end of Jun ‘14. Circumspection, rather than elation, is suggested.)

FTSE 100 Index Chart

FTSE_Feb1615

The daily bar chart pattern of FTSE 100 appears to be consolidating within a bullish ‘ascending triangle’ pattern, from which the likely break out is upwards. Remember that technically valid upward break outs require a surge in volumes.

Daily technical indicators are in bullish zones after correcting overbought conditions. MACD has crossed below its signal line inside its overbought zone. RSI is moving sideways above its 50% level. Slow stochastic dropped sharply from its overbought zone, but is about to re-enter it.

On longer term weekly chart (not shown), the index is trading well above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but Slow stochastic is looking overbought. (However, the index has been trading within a bearish ‘rising wedge’ pattern since the end of Nov ‘14. Caution is advised.)

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