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Monday, March 2, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Feb 27, 2015

S&P 500 Index Chart

SPX_FEB2715

The daily bar chart pattern of S&P 500 touched a new lifetime high of 2120 on Wed. Feb. 25 ‘15, but formed a small ‘reversal day’ pattern and closed marginally lower for the week. All three EMAs are rising, and the index is trading above them in a long-term bull market.

However, as pointed out in last week’s analysis, there are a couple of bearish dark clouds on the horizon – 1) falling volumes (marked by blue arrow) during the bull rally in Feb.; 2) a large ‘falling wedge’ pattern within which the index has been trading for the past 6 months.

Daily technical indicators are in the process of correcting overbought conditions, but are in bullish zones. MACD has formed a small ‘rounding top’ pattern inside its overbought zone, and is falling towards its signal line. RSI has also formed a small ‘rounding top’ pattern below its overbought zone. Slow stochastic is falling inside its overbought zone. Some more correction is likely.

A convincing break out above the ‘falling wedge’ pattern is necessary to chase the bears away. Till then, caution is advised. A large bearish pattern at a market top needs to be respected.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs and touched a lifetime weekly high but formed a small ‘reversal week’ pattern. Weekly technical indicators are looking bullish but overbought. Also, all three indicators are showing negative divergences by failing to touch new highs with the index. It may be a good idea to book some part profits.

FTSE 100 Index Chart

FTSE_FEB2715

The daily bar chart pattern of FTSE 100 touched a lifetime high of 6967 on Fri. Feb 27 backed by strong volumes (not shown on chart), but continued to trade within a bearish ‘rising wedge’ pattern.

All three daily technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index. The widening gap between the 20 day and 200 day EMAs is a sign of overbought condition.

At the time of writing this post, the index is trading lower after touching a new intra-day high of 6974. A convincing break out above the wedge is required for bulls to establish complete control. The more likely move should be a drop below the ‘wedge’.

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 MACD and Slow stochastic are inside their respective overbought zones. Part profit booking may be a good idea.

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