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Monday, May 4, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – May 01, 2015

S&P 500 Index Chart

SPX_May0115

The daily bar chart pattern of S&P 500 touched a new intra-day high of 2126 on Mon. Apr 27, but formed a ‘reversal day’ pattern (higher high, lower close) and started correcting. The possibility was mentioned in last week’s post.

After dropping below its 20 day and 50 day EMAs and touching a low of 2078 on Thu. Apr 30, the index recovered and closed above the 2100 level by the end of week on expectations of a postponement of any interest rate hike due to a slowing US economy.

The consolidation within ‘symmetrical triangle’ or ‘ascending triangle’ patterns – mentioned in earlier posts – is being discarded as the index appears to be forming another ‘rising wedge’ pattern.

All three technical indicators are in bullish zones, but failed to touch new highs with the index. Higher volumes on down days is an indication of ‘distribution’. Despite the bearish signals, the index is trading above all three EMAs in a bull market, and continues to touch new highs.

Stay invested – but booking part profits may be a good idea.

On longer term weekly chart (not shown), the index formed a ‘reversal week’ bar (higher high, lower close), but closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 Index Chart

FTSE_May0115

The daily bar chart pattern of FTSE 100 touched a new high of 7123 on Mon. Apr 27, but failed to sustain above the 7100 level. The index dropped below its 20 day and 50 day EMAs, and briefly breached the lower edge of the large ‘rising wedge’ pattern.

The index bounced up inside the ‘wedge’ by the end of the week, but failed to cross above its 20 day EMA and the 7000 level – keeping bears interested.

Daily technical indicators are looking bearish. MACD is falling below its signal line in positive territory. RSI is trying to climb above its 50% level. Slow stochastic has dropped to the edge of its oversold zone. Note that all three indicators failed to touch new highs with the index.

FTSE is trading well above its rising 200 day EMA in a bull market. But the formation of a large reversal pattern (‘rising wedge’) should be respected. Stay invested, but take some profits off the table.

On longer term weekly chart (not shown), the index touched a new high but formed a large ‘reversal week’ bar and closed below 7000. The index is trading above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showed negative divergences by failing to touch new highs with the index.

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