Sunday, December 13, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Dec 11, 2015

S&P 500 Index Chart

The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "The entire trading since the beginning of Nov ‘15 has been a sideways consolidation within a ‘symmetrical triangle’ pattern, from which a break out can occur at any time. Since triangles tend to be continuation patterns, the break out is expected to be upwards. But triangles are unreliable – so one should wait for the break out before initiating a buy/sell action."

The index broke down below the triangle on the last day of the week, and dropped below all three EMAs into bear territory. A bearish pattern of lower tops and lower bottoms has been formed.

Strong volumes on 4 of the 5 down days last week clearly show bear domination. All three daily technical indicators are in bearish zones, and showing downward momentum - hinting at a deeper correction.

Is the index getting ready to enter another bear phase? It may be a bit early to call, as the technical pattern is still evolving. If the index bounces up strongly from its current level - like it did in mid-Nov '15 - there is a possibility of formation of a bullish 'flag' pattern. 

On longer term weekly chart (not shown), the index closed below its 20 week and 50 week EMAs, but well above its 200 week EMA in a long-term bull market. Weekly technical indicators are turning bearish.

FTSE 100 Index Chart

The daily bar chart pattern of FTSE 100 closed lower on all 5 trading days last week, and dropped below the 6000 level - losing 4.5% on a weekly closing basis. All three EMAs are moving down and the index is trading well below them in a bear market.

Daily technical indicators are in their oversold zones, which can lead to a technical bounce at any time. But it should not be used as a bottom-fishing opportunity. Why? Because there is no sign of a bottom formation as yet.

On longer term weekly chart (not shown), the index stayed below all three weekly EMAs during the week. Weekly technical indicators have turned bearish. The ‘death cross’ of the 50 week EMA below the 200 week EMA will technically confirm a long-term bear market. 

No comments: