Monday, March 28, 2016

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Mar 24, 2016

S&P 500 index chart

In a trading week shortened by Good Friday, the daily bar chart pattern of S&P 500 formed a small 'reversal day' bar (higher high, lower close) on Tue. Mar 22 and started correcting down towards its 200 day EMA.

Readers were forewarned by the following comments in last week's post: "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."

The 20 day EMA has crossed above the 200 day EMA, which is a bullish sign. However, the 'golden cross' of the 50 day EMA above the 200 day EMA, which technically confirms a bull market, is awaited.

Daily technical indicators are in the process of correcting overbought conditions. The correction towards the 200 day EMA may continue, but bulls have been buying the dips, and can do so again.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs for the third week in a row, but formed a 'reversal week' bar (higher high, lower close). The index is trading more than 200 points above its rising 200 week EMA in a long-term bull market, but a pullback towards the 50 week EMA is a possibility. Upward momentum of weekly technical indicators is waning.

FTSE 100 index chart

The daily bar chart pattern of FTSE 100 tested but failed to overcome resistance from its 200 day EMA. By the end of a holiday-shortened week, bears reasserted themselves. 

The index fell sharply on Thu. Mar 24 and closed below its 20 day EMA but just above the 6100 level - losing about 1.3% on a weekly closing basis.

Daily technical indicators are beginning to turn bearish. MACD has crossed below its signal line, and about to drop from its overbought zone. RSI is seeking support from its 50% level. Slow stochastic is falling towards its 50% level.

A fall below the 50 day EMA towards the 6000 level seems likely.

On longer term weekly chart (not shown), the index slipped below its 20 week EMA and is trading below its three weekly EMAs in a long-term bear market. Upward momentum of weekly technical indicators have stalled.

No comments: