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Monday, June 8, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jun 05, 2015

S&P 500 Index Chart



Strong volumes on down days and downward momentum visible on technical indicators had led to the following comment in last week's post on the daily bar chart pattern of S&P 500: "Some more correction can not be ruled out." 

The index managed to close above its 50 day EMA on the first two days of the trading week, followed by a close above its 20 day and 50 day EMAs in bull territory on Wed. Jun 3 - but that was the end of an attempt at a recovery by bulls.

Bear selling caused a sharp drop below the 50 day EMA and the 2100 level. The index lost only 15 points on a weekly closing basis, but has formed a bearish pattern of 'lower tops and lower bottoms' since making a small 'double top' reversal pattern by touching 2134 on May 20 & 21 '15.

The 200 day EMA is rising, and the index continues to trade well above it - which is the sign of a long-term bull market. That doesn't mean the correction has ended. Note that the index touched a higher bottom than the May 6 low of 2068, but all three technical indicators are showing negative divergences by touching lower bottoms.

MACD and RSI are in bearish zones and sliding. Slow stochastic has dropped sharply inside its oversold zone. That can lead to a technical bounce. Bears are likely to use any rally to sell.

On longer term weekly chart (not shown), the index found good support from its 20 week EMA and closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are still in bullish zones, but showing downward momentum and negative divergences by touching lower bottoms.

FTSE 100 Index Chart



The daily bar chart pattern of FTSE 100 dropped below its 20 day and 50 day EMAs on Mon. Jun 1. On wed. Jun 3, the index attempted a recovery but faced resistance from its falling 20 day EMA. That was just the opportunity bears were waiting for.

Strong selling on the last two days of the week sent the index crashing below its 200 day EMA into bear territory for the first time in more than 4 months. By dropping and closing below the May 7 low of 6810, the index has formed a bearish pattern of 'lower tops and lower bottoms' since touching a lifetime high of 7123 on Apr 27 '15.

Daily technical indicators are bearish. MACD is falling towards its oversold zone. RSI is below its 50% level. Slow stochastic is inside its oversold zone. A technical bounce is a possibility - but bears have a firm grip on the chart. 

On longer term weekly chart (not shown), the index dropped sharply below its 20 week EMA and is seeking support from its 50 week EMA. 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 and showing downward momentum.

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