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Monday, August 1, 2016

S&P 500 and FTSE 100 charts (Jul 29 '16): bull market consolidations continue

S&P 500 index chart pattern


The following remarks appeared in last week's post on the daily bar chart pattern of S&P 500: "Some more consolidation - or a correction - is likely. Booking part profits may be a good idea."

The index continued its sideways consolidation for the 2nd week - touching a low of 2159 and a new high of 2177 - but closing slightly lower for the week. 

All three EMAs are rising, and the index is trading above them in a bull market. An upward break out from the consolidation zone is likely.

However, MACD and Slow stochastic have formed 'rounding top' patterns inside their overbought zones. RSI is moving sideways below its overbought zone. Some more consolidation or a correction can't be ruled out.

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 21st week in a row, but formed a 'reversal' bar (higher high, slightly lower close). Weekly technical indicators are looking overbought.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 continued to consolidate sideways for the 2nd week, closing marginally lower for the week.

All three EMAs are rising, and the index is trading above them in a bull market. That means the index should resume its up move soon.

However, daily technical indicators are hinting at a correction. MACD has formed a 'rounding top' pattern and crossed below its signal line inside overbought zone. RSI is moving sideways below its overbought zone. Slow stochastic has dropped down from its overbought zone.

An index can remain overbought for long periods during a bull market. So, there is no reason to panic and sell off. Partial profit booking may be a better idea.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market for the 5th week in a row but formed a 'reversal' bar (higher high, slightly lower close). All three EMAs have converged, hinting at a sharp move. Weekly technical indicators are looking overbought and signalling a correction.

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