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Monday, August 31, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Aug 28, 2015

S&P 500 Index Chart

SPX_Aug2815

The daily bar chart pattern of S&P 500 plunged to a low of 1867 on a huge volume surge on Mon Aug 24 – which indicates a ‘panic bottom’ well below the downward target of 1945 (mentioned in last week’s post).

Since ‘panic bottoms’ seldom hold, the probability of the index dropping even lower – perhaps to test the Oct ‘14 low – is quite high.

The index formed a small ‘double bottom’ pattern by testing the low of 1867 on Tue. Aug 25, and then bounced up sharply to close with a weekly gain of about 1%.

However, the upward bounce was accompanied by sliding volumes, which raises questions about the sustainability of the recovery.

Note that the 50 day EMA is about to cross below the 200 day EMA – the impending ‘death cross’ will technically confirm the start of a bear phase.

Two of the daily technical indicators – RSI, Slow stochastic - have corrected oversold conditions, but remain in bearish zones. MACD is deep inside its oversold zone, but showing signs of recovery.

Any further pullback towards the ‘rectangle’ is likely to attract bear selling.

On longer term weekly chart (not shown), the index dropped well below its 20 week and 50 week EMAs but formed a ‘reversal week’ pattern (lower low, higher close) and closed above its rising 200 week EMA in a long-term bull market. The 20 week and 50 week EMAs have started moving down. Weekly technical indicators are in bearish zones.

FTSE 100 Index Chart

FTSE_Aug2815

The daily bar chart pattern of FTSE 100 crashed to a 52 week low of 5768 on Mon. Aug 24 – accompanied by a strong volume surge (not shown on chart), indicating the formation of a ‘panic bottom’.

‘Panic bottoms’ seldom hold. The possibility of FTSE falling even lower can’t be ruled out.

The index bounced up sharply to close the week with a gain of almost 1%, but is well below its three falling EMAs in bear territory.

Two of the daily technical indicators – RSI, Slow stochastic - have corrected oversold conditions, but remain in bearish zones. MACD is deep inside its oversold zone, but showing signs of turning around.

Any attempt at a pullback towards the ‘symmetrical triangle’ will encourage bears to sell.

On longer term weekly chart (not shown), the index dropped well below its three weekly EMAs but formed a ‘reversal week’ pattern (lower low, higher close) that may encourage bulls. The index has probably entered a long-term bear market. Weekly technical indicators are looking bearish and oversold.

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