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Monday, March 21, 2016

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Mar 18, 2016

S&P 500 index chart


The daily bar chart pattern of S&P 500 shows a pullback towards the 200 day EMA during the first two days of the week, which was used by bulls to buy. 

The index surged past the 2050 level intra-day with strong volume support before closing just below it with a weekly gain of 1.35%. US Fed's decision to keep interest rates unchanged boosted bullish sentiment.

Is it time for bears to beat a retreat? Not yet. Despite the 'double bottom' reversal pattern formed during Jan-Feb '16 and the subsequent strong rally, the sharp fall from the Dec 29 '15 top of 2082 has not been fully retraced.

The 20 day EMA is rising rapidly towards the 200 day EMA. A 'golden cross' of the 50 day EMA above the 200 day EMA will provide the technical confirmation of a return to a bull market.

Note what had happened after the 'golden cross' in Nov '15. The index failed to stay above its 200 day EMA for more than 2 months, and formed a bearish pattern of 'lower tops and lower bottoms' before correcting sharply.

There is a possibility that a similar pattern may get formed again. All three technical indicators are looking overbought, which may lead to a correction or consolidation. 

Also, the rally during Mar '16 has been within a 'rising wedge' pattern, which has bearish implications. So, it may be better to err on the side of caution because it is a bit late for jumping in feet first.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs for the second week in a row. At the time of writing this post, the index is trading more than 200 points above its rising 200 week EMA in a long-term bull market. Weekly technical indicators are looking bullish.

FTSE 100 index chart


The daily bar chart pattern of FTSE 100 continued to face strong resistance from the 6200 level during the first 3 days of the week. On Thu. Mar 17 '16, the index touched an intra-day high of 6220 and closed at 6201.

On Fri. Mar 18, the index rose further and tested resistance from its 200 day EMA with a strong volume surge (not shown), but formed a 'reversal day' pattern (higher high, lower close). 

The index gained just about 50 points on a weekly closing basis. However, at the time of writing this post, the index has slipped about 15 points. Bears continue to hold the upper hand, and may strike at any time.

Daily technical indicators are in bullish zones, but not showing any upward momentum. MACD is entangled with its signal line and moving sideways inside its overbought zone. RSI is moving sideways above its 50% level. Slow stochastic has slipped down from its overbought zone.

On longer term weekly chart (not shown), the index closed above its 20 week EMA for the 3rd week in a row, but below its sliding 50 week and 200 week EMAs in a long-term bear market. Weekly technical indicators are looking bullish. MACD is rising in negative zone. RSI is straddling its 50% level. Slow stochastic has entered its overbought zone for the first time since Apr '15.

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