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Monday, October 17, 2016

S&P 500 and FTSE 100 charts (Oct 14 '16): bears keep bulls in check

S&P 500 index chart pattern

The following comments were made in the previous post on the daily bar chart pattern of S&P 500: "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."

The index dropped below the 2120 level intra-day on Thu. but bounced up to close inside the 'descending triangle' pattern within which it has been consolidating for the past 8 weeks.

The 20 day EMA has crossed below the 50 day EMA, and the index is trading below them. However, the 200 day EMA is still rising - keeping bullish hopes alive.

Higher volumes on recent down-days indicate bears have the stronger hand. All three daily technical indicators are in bearish zones  but are showing positive divergences by failing to touch lower bottoms with the index.

An upward bounce towards the blue down trend line is a possibility. Bears are likely to use the opportunity to sell again.

On longer term weekly chart (not shown), the index closed below its 20 week EMA but above its 50 week and 200 week EMAs in a long-term bull market for the 32nd week in a row. The index may be correcting after forming a bearish 'rounding top' pattern. Weekly technical indicators are still in bullish zones but showing downward momentum.

FTSE 100 index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: "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."

Both the expected index movements occurred, but in reverse order. The index rose to touch a new lifetime high of 7130 on Tue. Oct 11 - only to form a 'reversal day' pattern (higher high, lower close) and pulled back to the top of the 'ascending triangle' pattern on Thu.

The index bounced up after receiving good support from its rising 20 day EMA, but closed about 0.5% lower for the week. All three daily technical indicators are in bullish zones but showing a bit of downward momentum.

Expect some consolidation or a correction before bulls can resume control.

On longer term weekly chart (not shown), the index formed a weekly 'reversal bar' (higher high, lower close) but closed above its three weekly EMAs in a long-term bull market for the 16th week in a row. Weekly technical indicators are looking overbought and showing negative divergences by failing to touch new highs with the index. 

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