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Monday, June 22, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jun 19, 2015

S&P 500 Index Chart

S&P 500_Jun1915 

The daily bar chart pattern of S&P 500 took investors on another roller-coaster ride last week. The index dropped to an intra-day low of 2072 on Mon. Jun 15 – forming a small ‘double bottom’ reversal pattern.

Over the next 3 days, it rallied past its 20 day and 50 day EMAs – closing above the 2120 level in bull territory on Thu. Jun 18. On the last day of the week, the index corrected sharply – backed by the strongest volumes in 3 months.

Note that the index closed above its three daily EMAs in a long-term bull market – but at the same level that it closed more than 4 months back, and appears to be undergoing a sideways consolidation within a large bearish ‘rising wedge’ pattern.

Strong volumes on down-days may be a sign of ‘distribution’ from stronger to weaker hands.

Daily technical indicators are giving mixed signals. MACD crossed above its signal line in negative zone, but its upward momentum is weak. RSI is above its 50% level, but moving down. Slow stochastic is moving up towards its overbought zone.

Volatile index movements is often a sign of a change of trend. Stay invested, but remain watchful.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA intra-week, but closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, and showing slight upward momentum.

FTSE 100 Index Chart

FTSE_Jun1915

The following comments appeared in last week’s post on the daily bar chart pattern of FTSE 100: “…the index has so far closed within the 3% ‘whipsaw’ limit below its 200 day EMA. That means the breach below the 200 day EMA has not been technically validated yet. Only a close below 6600 will do that.”

On Thu. Jun 18, the index dropped to an intra-day low of 6625 – testing the 3% ‘whipsaw’ limit below the 200 day EMA, but bounced up to close above the 6700 level. Despite the sharp correction, the breach below the 200 day EMA awaits technical confirmation.

It may be a temporary respite for bulls. The 20 day EMA is ready to drop below the 200 day EMA. The 50 day EMA is falling towards the 200 day EMA. The 200 day EMA has started sliding down. These are bearish signs.

A last-minute resolution of Greek’s sovereign debt problems may act as a positive trigger for bulls.

Daily technical indicators are in the process of correcting oversold conditions. MACD is inside its oversold zone, but has stopped falling. RSI has bounced up from the edge of its oversold zone. Slow stochastic is trying to emerge from its oversold zone.

Note that RSI and Slow stochastic are showing positive divergences by not touching lower lows with the index. The index may pull back to test resistance from its 200 day EMA.

On longer term weekly chart (not shown), the index dropped sharply below its 50 week EMA and closed below it. The 200 week EMA is still rising, and the index is trading well above it in a long-term bull market. Weekly technical indicators are looking bearish but showing signs of upward momentum.

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