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Monday, May 16, 2016

Stock Index Chart Patterns: S&P 500 and FTSE 100 - May 13, 2016

S&P 500 index chart

The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "An upward bounce is possible from current level. Bears may use it to sell again."

The index did bounce up above the 2080 level into bull territory. But accompanying volumes were not strong enough to turn the bounce into a rally. Bears used the opportunity to sell. The index closed just below its 50 day EMA - losing 10 points (0.5%) on a weekly closing basis.

Daily technical indicators are looking bearish. MACD is falling below its signal line, and about to enter negative zone. RSI has dropped below its 50% level after a brief foray above it. Slow stochastic faced resistance from its 50% level and is dropping towards its oversold zone.

A continuation of the correction from the Apr 20 top of 2111 is likely. More ominous for bulls is the formation of a 'head and shoulders' reversal pattern with a 'neckline' at 2040. A breach of the 'neckline' may lead to a correction down to 1970.

On longer term weekly chart (not shown), the index closed lower for the 3rd straight week but above its three weekly EMAs in a long-term bull market for the 10th week in a row. Weekly technical indicators are in bullish zones but showing downward momentum.

FTSE 100 index chart

The daily bar chart pattern of FTSE 100 has some good news and some bad news for both bulls and bears. The index rose above its 50 day EMA to touch a high of 6193 on Thu. May 12, but faced strong resistance from its sliding 20 day EMA and closed at 6104 (lowest closing level during the week).

In the process, a 'reversal day' bar (higher high, lower close) - accompanied by the highest volumes of the week - got formed. On the next day, the index slipped below the 6100 level intra-day but closed higher at 6138 - forming another 'reversal day' bar (lower low, higher close).

A bitter struggle is going on between bulls and bears. Bulls ensured that the index closed above the support level of 6100 on all 5 trading days of the week. Bears ensured that the index closed below its three EMAs in bear territory on all 5 days.

Daily technical indicators are bearish. MACD is sliding deeper into negative zone. RSI is moving sideways below its 50% level. Slow stochastic is about to re-enter its oversold zone. (At the time of writing this post, the index is testing support from the 6100 level.)

On longer term weekly chart (not shown), the index closed below its three weekly EMAs in a long-term bear market for the 2nd week in a row. Weekly technical indicators are beginning to look bearish. Bears are regaining control after the 900+ points rally from the Feb '16 low to the Apr '16 top.

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