Monday, March 30, 2015

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

S&P 500 Index Chart

SPX_Mar2715

The daily bar chart pattern of S&P 500 rose to touch a lower top of 2115 on Mon. Mar 23 ‘15, formed a ‘reversal day’ pattern (higher high, lower close), corrected below its 20 day and 50 day EMAs, and broke down below the large ‘rising wedge’ pattern on Thu. Mar 26 ‘15. On the last day of the week, the index pulled back to the lower edge of the wedge.

The possibility of ‘buying exhaustion’ was mentioned in last week’s post. Note that the index may have formed a ‘double top’ reversal pattern – but the pattern will get confirmed only when the index falls convincingly below its previous low of 2040.

The downward target of the ‘double top’ pattern – if it gets confirmed technically – is 1965. That means a breach of the rising 200 day EMA and a dip into bear territory will come into play.

Technical indicators are looking bearish. MACD has crossed below its signal line and entered negative zone. RSI and Slow stochastic have dropped below their respective 50% levels. It will be interesting to see how well bulls can defend the 2040 level.

On longer term weekly chart (not shown), the index may have formed a bearish ‘double top’ pattern and dropped to its 20 week EMA, but closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones but showing downward momentum. The index is probably in a process of topping out. Part profit booking may be a good idea.

FTSE 100 Index Chart

FTSE_Mar2715

The following remarks appeared in last week’s analysis of the daily bar chart pattern of FTSE 100: “Note that all three indicators failed to touch new highs with the index. The combined negative divergences can bring the current rally to a halt.”

The index rose to touch a new lifetime high of 7065 on Tue. Mar 24 ‘15, faced resistance from the upper edge of the large ‘rising wedge’ pattern, formed a ‘reversal day’ pattern (higher high, lower close) and dropped down to its 50 day EMA by the end of the week. The prospect of a drop below the ‘wedge’ is looming large.

Daily technical indicators are turning bearish. MACD is about to cross below its signal line in positive zone. RSI has slipped below its 50% level. Slow stochastic has fallen sharply from its overbought zone, and its downward momentum is strong.

On longer term weekly chart (not shown), the index formed a large ‘reversal week’ pattern, but closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing downward momentum.

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