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.