Sunday, December 20, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Dec 18, 2015

S&P 500 Index Chart

It was a volatile week for the daily bar chart pattern of S&P 500. After dropping below the 2000 level after 2 months, the index formed a ‘reversal day’ pattern (lower low, higher close), and bounced up to close above its three EMAs in bull territory on Wed. Dec 16.

Bears pounced immediately to push the index below all three EMAs by the end of the week. The index lost barely 7 points on a weekly closing basis, but the huge volume surge on Fri. Dec 18 doesn’t augur well for bulls.

Daily technical indicators are in bearish zones, and showing downward momentum. The 20 day and 50 day EMAs are falling towards the 200 day EMA. A deeper fall into bear territory is likely.

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

FTSE 100 Index Chart

The following comments in last week’s post on the daily bar chart pattern of FTSE 100 may be worth repeating:

“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.”

The index closed below the 5900 level on Mon. Dec 14, but bounced up sharply to cross above 6150 on Thu. Dec 17. Resistance from the falling 20 day EMA proved too strong.

FTSE closed just above 6050 with a 100 points weekly gain, but huge volumes (not shown) on Fri. Dec 18 – a down day – is a clear sign of continued bear domination.

Daily technical indicators have corrected oversold conditions, but remain in bearish zones. All three EMAs are falling and the index is trading below them in a bear market.

On longer term weekly chart (not shown), the index stayed well below all three weekly EMAs during the week. Weekly technical indicators are in bearish zones. 

The 20 week EMA has crossed below the 200 week EMA for the first time in more than 3 years. The ‘death cross’ of the 50 week EMA below the 200 week EMA will technically confirm a long-term bear market.

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