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Monday, April 18, 2016

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Apr 15, 2016

S&P 500 index chart

The daily bar chart pattern of S&P 500 shows that bulls were able to overcome another attempt by bears to stall the sharp rally from the Feb '16 low.

After a short pause in a sideways consolidation between 2040 and 2060 - during which the 20 day EMA provided good support - the index broke out upwards.

At the time of writing this post, the index has almost reached 2090 and is trading above its three EMAs in bull territory. The 'golden cross' of the 50 day EMA above the 200 day EMA has technically confirmed a return to a bull market.

There are a couple of worrying signs for bulls. Both MACD and RSI are showing negative divergences by touching lower tops. Slow stochastic is well inside its overbought zone.

Another spell of correction or consolidation may be on the cards. Bulls are likely to use the opportunity to buy.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs for the 6th week in a row. The index is trading 250 points above its rising 200 week EMA in a long-term bull market. The 20 week EMA is about to cross above the 50 week EMA for the first time this year. Weekly technical indicators are in bullish zones, but Slow stochastic is looking overbought.

FTSE 100 index chart

The following comments were made in last week's post on the daily bar chart pattern of FTSE 100: "...the index has slipped down after testing resistance from its 200 day EMA. Note that each test of a resistance level makes it weaker and more susceptible to a breach. In other words, the index may break out above its 200 day EMA soon."

The index shows a textbook break out above the 200 day EMA on Wed. Apr 13 '16, accompanied by a sharp increase in volumes (not shown) that technically validated the break out.

The upward breakout was preceded by 6 weeks of sideways consolidation that received good support from the rising 50 day EMA - forming a bullish 'ascending triangle' pattern.

At the time of writing this post, the index has bounced up after a pullback to the 200 day EMA - giving a buying opportunity to those who may have missed buying on the breakout.

Daily technical indicators are in bullish zones, but showing a bit of downward momentum due to the index pulling back. Bulls will need to overcome strong resistance from the zone between 6400-6500 if they wish to regain control of the chart.  

On longer term weekly chart (not shown), the index closed above its three weekly EMAs for the first time after almost 11 months. Weekly technical indicators are looking bullish. The year long down trend may be finally coming to an end.

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