Amazon deals

Monday, September 12, 2016

S&P 500 and FTSE 100 charts (Sep 09 '16): bulls retreat after fierce bear attacks

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 had been consolidating sideways within a 'rectangle' pattern for two months, during which it had touched a lifetime high of 2194 on Aug 15. 

The sideways consolidation continued during the first three sessions of a holiday-shortened trading week. A missile test by North Korea was just the excuse bears needed to launch a fierce attack on Fri. Sep 9. 

The index opened with a downward 'gap' below its 20 day EMA and dropped sharply to close below its 50 day EMA and the 2130 level - losing 2.4% (52 points) on a weekly closing basis.

Daily technical indicators have turned bearish and are showing strong downward momentum. MACD is about to drop into negative territory. RSI has fallen all the way to the edge of its oversold zone. Slow stochastic has slipped below its 50% level.

It is possible that the index may use the 'support-resistance zone' between 2110-2120 to organise a pullback rally towards the lower edge of the 'rectangle'. Bears are likely to 'sell the rally'.

In case 2110 gets breached on the downside, expect a test of support from the rising 200 day EMA.

On longer term weekly chart (not shown), the index dropped to seek support from its 20 week EMA and closed above its three weekly EMAs in a long-term bull market for the 27th week in a row. Weekly technical indicators are correcting overbought conditions.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 had bounced up from the 6750 support level on Fri. Sep 2 to touch a lower top. The index started to correct from the beginning of the week, but received good support from its 20 day EMA.

A sell-off in global stock markets triggered profit booking on Fri. Sep 9. The index dropped below its 20 day EMA - receiving support from the 6750 level once again - but lost 1.7% (118 points) on a weekly closing basis.

Since touching a high of 6955 on Aug 15, the index appears to be forming a 'descending triangle' pattern from which the likely breakout is downwards.

The index should receive support from the 'support-resistance zone' between 6600-6750. The rising 50 day EMA is within the support zone, and can provide additional support.

In case the index falls below 6600, a test of support from the rising 200 day EMA may be on the cards.

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 is seeking support from its 50% level.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market for the 11th week in a row. Weekly technical indicators are correcting overbought conditions.

No comments: