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Monday, January 9, 2017

S&P 500 and FTSE 100 charts (Jan 06 '17): Touch new highs as bulls go on a rampage

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 began the New Year in a very bullish mood. On a holiday-shortened trading week, the index rose to touch a new intra-day high of 2282 on Fri. Jan 6, and closed at a lifetime high of 2277.

However, volumes tapered a bit on Friday, which isn't great news for bulls. Daily technical indicators are in bullish zones but giving mixed signals.

MACD is moving sideways below its falling signal line in positive zone. RSI bounced up after receiving support from its 50% level, but isn't showing much upward momentum. Slow stochastic bounced up sharply from the edge of its oversold zone and has entered its overbought zone.

All three indicators are showing negative divergences by failing to touch new highs with the index. The three EMAs are rising, and the index is trading above them in a bull market. 

The index can continue to move higher. But it may not be a bad idea to book part profits. 

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market for the 44th week in a row. All three weekly technical indicators are looking overbought, and showing negative divergences by failing to touch new highs.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 continues to defy gravity and bears. The index negated the 'rising wedge' pattern that had formed on the chart (refer last week's post) and climbed above the 7200 level in a holiday-shortened trading week.

At the time of writing this post, the index has slipped 10 points after touching a lifetime high of 7239. The rally from the Dec 2 low of 6678 has been very steep. Such steep rallies can't be sustained with last week's sliding volumes (not shown on chart).

All three daily technical indicators are inside their overbought zones. Overbought conditions can also be seen from the sharply rising 20 day and 50 day EMAs, with the index trading 150 points above its 20 day EMA.

The index may move higher, but looks ripe for a correction. Part profit booking may be a good idea.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market for the 28th 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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