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Monday, January 2, 2017

S&P 500 and FTSE 100 charts (Dec 30 '16): form bearish patterns after touching new highs

S&P 500 index chart pattern


The following comments from last week's post on the daily bar chart pattern of S&P 500 may be noted: "... the index should breakout upwards from the triangle. However, triangles tend to be unreliable patterns. A breakout can also occur downwards ..."

The index broke out upwards from the small symmetrical triangle on Dec 27, but with low volume support. Upward breakouts should be accompanied by a significant increase in volumes to be technically valid.

An 'end-run' like sharp downward move followed. After receiving brief support from the 20 day EMA on Dec 29, the index dropped to close below the 2240 level. During 2016, the index gained about 195 points (9.5%).

Daily technical indicators are looking bearish after correcting overbought conditions. MACD is falling below its signal line in positive zone - after forming a 'rounding top' reversal pattern. RSI is seeking support from its 50% level. 

Slow stochastic has dropped inside its oversold zone. Some more correction towards the rising 50 day EMA is likely.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market for the 43rd week in a row. All three weekly technical indicators are in the process of correcting overbought conditions.

FTSE 100 index chart pattern


After forming a 'double bottom' reversal pattern during Nov '16, the daily bar chart pattern of FTSE 100 rallied during Dec '16 as if there will be no tomorrow. 

In a holiday-curtailed trading week marked by low volumes (not shown), the index rose to touch and close at a new lifetime high - gaining 900 points (>14%) during 2016.

The index is trading above its three rising EMAs in a bull market, but has formed a narrow 'rising wedge' pattern from which a downward breakout is the most logical outcome.

All three daily technical indicators are inside their respective overbought zones - warning about a correction.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market for the 27th 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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