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Monday, October 10, 2016

S&P 500 and FTSE 100 charts (Oct 07 '16): consolidating near lifetime highs

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 appears to have lost its sense of direction. The index consolidated within a 22 points range, as it oscillated about its 20 day and 50 day EMAs, and closed 15 points lower for the week.

The index is trading above its rising 200 day EMA in bull territory, but may be forming a bearish 'descending triangle' pattern from which the likely breakout is downwards.

Daily technical indicators are in neutral zones, and showing a bit of downward momentum. Some more consolidation, or a correction towards the 2120 level can be expected.

A convincing breakout above the blue down trend line will negate the near-term bearishness. The current technical signals are not conducive for such an upward breakout.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market for the 31st week in a row. The index may be forming a 'symmetrical triangle' pattern, from which a breakout can occur in either direction. Weekly technical indicators are in bullish zones but showing slight downward momentum.

FTSE 100 index chart pattern

The following comment was made in last week's post on the daily bar chart pattern of FTSE 100: ".. .a bullish 'ascending triangle' pattern may be forming - from which an upward break out above 6940 is likely."

The index broke out above the 'ascending triangle' on Oct 3, and touched a new 52 week high of 7122 the next day - testing its Apr '15 high of 7123. It consolidated sideways for the rest of the week, closing with a gain of 2.1% for the week.

A sharp fall in the exchange rate of the UK Pound against the US Dollar triggered the upward breakout. All three EMAs are rising, and the index is trading above them in a bull market. 

Daily technical indicators are in bullish zones, but their upward momentum have stalled. Expect some consolidation, and a possible pullback towards the top of the 'ascending triangle' before the index attempts to touch a new high.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market for the 15th week in a row. Weekly technical indicators are looking overbought and showing negative divergences by failing to touch new highs with the index. A correction may be in the offing.

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