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Monday, September 5, 2016

S&P 500 and FTSE 100 charts (Sep 02 '16): bulls trying to regain control

S&P 500 index chart pattern

The following remarks were made in last week's post on the daily bar chart pattern of S&P 500: "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."

Following a positive close above its three EMAs on Mon. Aug 29, the index gradually drifted down to its rising 50 day EMA on Thu. Sep 1, before bouncing up to close above its three EMAs with a small gain of 11 points for the week.

Note that volumes on the two up-days (Mon. & Fri.) were lower than the three down-days in between. That is an indication that bears are still quite active.

Daily technical indicators are looking mildly bullish. MACD is below its signal line in positive zone, but has stopped falling. RSI has bounced up a bit after receiving support from its 50% level. Slow stochastic has made a 'V' shaped recovery from the edge of its oversold zone, but remains below its 50% level.

For the past 8 weeks, the index has been consolidating sideways within a 'rectangle' pattern. The pattern is unreliable, as it can act as a 'continuation' or a 'reversal' pattern.

Since the index is in a bull market, expect an upward breakout after some more sideways consolidation within the 'rectangle'. It will be a prudent move to wait for the eventual breakout before initiating any buy/sell action.

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 26th week in a row. Weekly technical indicators are looking overbought.

FTSE 100 index chart pattern


In a holiday-shortened trading week, the daily bar chart pattern of FTSE 100 corrected down close to the 6720 level and the rising 50 day EMA, before bouncing up sharply on Fri. Sep 2 to close with a 0.8% (56 points) gain for the week. (At the time of writing this post, the index is trading 10 points lower.)

Daily technical indicators are looking bullish. MACD is below its signal line in positive zone, but is showing signs of moving up. RSI has moved above its 50% level. Slow stochastic bounced up sharply from its oversold zone and has just crossed above its 50% level.

The index is trading above its three EMAs in bull territory, and should rise above its previous top of 6955 (touched on Aug 15) soon. 

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market for the 10th week in a row. Weekly technical indicators are looking overbought.

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