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Monday, November 14, 2016

S&P 500 and FTSE 100 charts (Nov 11 '16): relief rallies face bear resistance

S&P 500 index chart pattern


The following comments appeared in last week's post on the daily bar chart pattern of S&P 500"All three daily technical indicators are looking oversold, which can trigger a pullback towards the 200 day EMA and the 2120 level. Bears may use the opportunity to sell again."

The pullback was much stronger than expected. A huge volume surge sent the index soaring past its 200 day EMA and the 2120 level and breached the down trend line of the 'descending triangle' pattern.

After crossing the 2180 level intra-day on Thu. Nov 10, the index faced bear selling and pulled back to the top of the 'descending triangle' before bouncing up to close above the 2160 level with a weekly gain of 3.8%.

What triggered the 100 points price spurt from last week's low? Oversold technical conditions led to some short covering and value buying. 

Trump's unexpected victory in the US Presidential election then led to a 'relief rally' as the 'event uncertainty' got removed and the market probably expected that a businessman at the helm will be good for business growth.

Daily technical indicators are in bullish zones. MACD rose sharply to enter positive zone. RSI crossed above its 50% level but lost upward momentum. Slow stochastic entered its overbought zone but also lost upward momentum. 

Some consolidation can be expected around current levels before the index attempts to touch a new high.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market for the 36th week in a row. Weekly MACD and RSI are in bullish zones. Slow stochastic has emerged from its oversold zone. All three indicators are showing upward momentum.

FTSE 100 index chart pattern


The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: "All three daily technical indicators are looking oversold. A technical bounce is likely. Bears may use such a bounce to sell again."

A strong technical bounce took the index past its falling 20 day and 50 day EMAs by Wed. Nov 9. The next day, bears flexed their muscles as the index breached the down trend line intra-day but stopped short of the 7000 level and dropped below its 20 day and 50 day EMAs - forming a 'reversal day' bar.

By the end of the week, the index fell further to test support from the 6700 level but closed at 6730 with a 0.5% weekly gain.

All three daily technical indicators are in bearish zones and showing downward momentum. A downward breach of the 6700 level and a test of support from the 200 day EMA is likely.

On longer term weekly chart (not shown), the index closed below its 20 week EMA for two straight weeks, but above its 50 week and 200 week EMAs in a long-term bull market for the 20th week in a row. Weekly technical indicators are looking bearish and showing downward momentum

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