Amazon deals

Monday, October 5, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Oct 02, 2015

S&P 500 Index Chart

SPX_Oct0215

After falling sharply below a bearish ‘rising wedge’ pattern, the daily bar chart pattern of S&P 500 touched an intra-day low of 1872 on Sep 29 (slightly higher than the Aug ‘15 low of 1867), formed a ‘reversal day’ bar and rallied on good volumes to close above its 20 day EMA and the 1950 level with a 1% gain on a weekly closing basis.

Bulls may have won last week’s battle, but continue to lose ground in the longer-term war. The index is trading well below its 50 day and 200 day EMAs in a bear market that was technically confirmed by the ‘death cross’ of the 50 day EMA below the 200 day EMA.

Daily technical indicators are in bearish zones but showing good upward momentum. MACD has crossed above its signal line and making another attempt to emerge from its oversold zone. RSI and Slow stochastic are rising towards their respective 50% levels. The rally may continue a bit longer – but bears may resume their selling soon.

On longer term weekly chart (not shown), the index closed below its falling 20 week and 50 week EMAs for the 7th week in a row, but is trading above its rising 200 week EMA in a long-term bull market. The 20 week EMA has crossed below the 50 week EMA for the first time in more than 3 years. Weekly technical indicators are in bearish zones, but their downward momentum have stalled.

FTSE 100 Index Chart

FTSE_Oct0215

The 'rectangle' pattern, within which the daily bar chart pattern of FTSE 100 has been trading for more than a month, has been redrawn to reflect last week's trading and a broader consolidation zone. (Such redrawing is often necessary to represent the changing technical structure.)

The index breached the lower edge of the 'rectangle' on Sep 29 by touching an intra-day low of 5877, but bounced up on good volume support to close the week with a small 21 points gain.

A 'rectangle' is usually a continuation pattern. Since the index entered it from above, the eventual breakout should be downwards. However, 'rectangle' patterns are unreliable. It is advisable to wait for the breakout before initiating long or short positions.

Note that the index is trading well below its falling 200 day EMA in a bear market. So, the odds of a downward breakout are better.

Daily technical indicators are showing good upward momentum, but only Slow stochastic has managed to enter bullish zone. MACD is trying to emerge from its oversold zone. RSI has reached its 50% level. Any further rally is likely to face twin resistances from the upper edge of the 'rectangle' and the falling 50 day EMA.

On longer term weekly chart (not shown), the index closed well below its three weekly EMAs for the 7th week in a row, and has probably entered a long-term bear market. Weekly technical indicators are in bearish zones, but their downward momentum have stalled.

No comments: