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Monday, August 29, 2016

S&P 500 and FTSE 100 charts (Aug 26 '16): bears trying to get on top

S&P 500 index chart pattern


Negative divergences visible on technical indicators in last week's post on the daily bar chart pattern of S&P 500 had hinted at a correction.

The index touched a slightly lower top of 2193 on Tue. Aug 23 and formed a bearish 'gravestone doji' pattern (in candlestick parlance) as well as a small 'double top' reversal pattern.

The index corrected just below its 20 day EMA on Thu. Aug 25 before the US Fed's hawkish stance on interest rate dropped the index to a low of 2160 before closing about 15 points lower on a weekly basis.

Daily technical indicators are looking bearish and showing downward momentum. MACD is falling below its signal line in positive zone. RSI has slipped below its 50% level. Slow stochastic has dropped to the edge of its oversold zone after forming a small 'double top' pattern inside its overbought zone.

Some more correction is possible. Support can be expected from the rising 50 day EMA. Bulls have been buying on every little dip, so a deep correction appears unlikely.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market for the 25th week in a row. Weekly technical indicators have started to correct overbought conditions.

FTSE 100 index chart pattern



The following comments were made in last week's post on the daily bar chart pattern of FTSE 100: "The index may correct some more. Expect some downside support from the zone between 6750-6780."

As if on cue, the index dropped below its rising 20 day EMA on Thu. Aug 25 and touched an intra-day low of 6779 before bouncing up to close at 6838 with a weekly loss of 21 points.

MACD and Slow stochastic are looking bearish and showing downward momentum after correcting overbought conditions, but RSI has managed to remain above its 50% level. 

The index may consolidate around current levels before resuming its up move.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market for the 9th week in a row. Weekly technical indicators have started to correct overbought conditions.

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