Formation of a 'rising wedge' pattern and overbought technical indicators in last week's post on the daily bar chart pattern of S&P 500 triggered a small correction.
Note that after the break out and close below the 'rising wedge' on Mon. Nov 28, the index pulled back to the lower edge of the 'wedge' and even touched a new high of 2214 on Wed. Nov 30.
On Thu. Dec 1 and Fri. Dec 2, the index slipped below the 2190 level intra-day, but closed slightly higher on both days. Is it a coincidence that the index found support near 2190?
Hardly - because 2190 was the previous highest closing level for the index (on Aug 15 '16) since the rally started from Nov 7 and closed at a new high of 2213 on Nov 25. Previous tops often provide support.
Daily technical indicators have corrected overbought conditions, but remain in bullish zones. The index is trading above its three EMAs in a bull market.
Some more correction to test support from the rising 20 day EMA can't be ruled out. However, the index should resume its up move soon.
On longer term weekly chart (not shown), the index has formed a 'reversal week' pattern (higher high, lower close), but closed well above its three weekly EMAs in a long-term bull market for the 39th week in a row. All three indicators are in bullish zones but showing negative divergences by failing to touch new highs with the index.
FTSE 100 index chart pattern
The following remarks were made in last week's post on the daily bar chart pattern of FTSE 100: "Daily technical indicators are in bearish zones and not showing much upward momentum. Some more sideways consolidation is likely."
The index failed to overcome resistance from its sliding 50 day EMA and dropped down to test support from the 6700 level. On Dec 1&2, there were intra-day breaches of the 6700 level but the index managed to close higher.
At the time of writing this post, the index has bounced up to 6750 but is facing resistance from the falling 20 day EMA.
The index is trading above its 200 day EMA in bull territory, but all three daily technical indicators are moving sideways in bearish zones. Bulls have managed to defend the 6700 level so far, but their resolve may be weakening.
The risk of a downward break out below 6700 is increasing by the day.
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 23rd week in a row. Weekly MACD is in bullish zone but showing downward momentum. RSI is moving sideways in neutral zone. Slow stochastic is just above the edge of its oversold zone.