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Monday, February 9, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Feb 06, 2015

S&P 500 Index Chart


The daily bar chart pattern of S&P 500 continued its sideways consolidation within a rectangular band between 1988 and 2064. On Mon. Feb 2, the index dropped below 1988 intraday, but bounced up to close above 2020 – forming a bullish ‘reversal day’ pattern (lower low, higher close).

The index rallied for the rest of the week, breaching the 2064 level to touch an intra-day high of 2072 on Fri. Feb 6, but dropped down to close inside the rectangular band – forming a bearish ‘reversal day’ pattern (higher high, lower close).

Volumes tend to dip during consolidations, but have remained fairly high during the past 5 weeks - with strong volumes on down-days. That should be a matter of concern for bulls – as it is a sign of ‘distribution’.

Daily technical indicators are in bullish zones. MACD has entered positive territory. RSI is above its 50% level. Slow stochastic is inside its overbought zone. The index is trading well above its rising 200 day EMA in a bull market. But the possibility of a break down below the rectangle should be kept in mind.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market. All three weekly technical indicators are in bullish zones, and in the process of reversing their downward momentum. Some more consolidation is likely.

FTSE 100 Index Chart


The daily bar chart pattern of FTSE 100 touched an intraday low of 6732 on Mon. Feb 2 ‘15, but formed a ‘reversal day’ pattern (lower low, higher close) and rallied to test the 6900 level the following day. However, after failing to breach the 6900 level, and the index consolidated sideways between 6800 and 6900 for the rest of the week.

The ‘golden cross’ of the 50 day EMA above the 200 day EMA has technically confirmed a return to a bull market after nearly 4 months. A convincing move above the Sep ‘14 top of 6905 will restore control of the chart to bulls.

Daily technical indicators are looking overbought. Some more consolidation or a correction can’t be ruled out.

On longer term weekly chart (not shown), the index has traded above its three weekly EMAs in a long-term bull market for 3 straight weeks. Weekly technical indicators are looking bullish. The index is looking poised to reach new heights.

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