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Monday, January 23, 2017

S&P 500 and FTSE 100 charts (Jan 20 '17): bears halt bull rallies

S&P 500 index chart pattern

After touching a lifetime high of 2282 on Jan 6, the bull rally on the daily bar chart pattern of S&P 500 has stalled. 

The index has received support from its rising 20 day EMA as it consolidated sideways - touching a sequence of lower tops and higher bottoms, forming a 'symmetrical triangle' pattern.

On the daily closing chart (not shown), the index has touched a sequence of lower tops and lower bottoms - somewhat like the pattern visible on the RSI.

The index is still trying to make up its mind whether Trump's presidency will be favourable or unfavourable for the stock market.

All three daily technical indicators are in bullish zones, but not showing upward momentum. Note that MACD has formed a large head-and-shoulders like reversal pattern that is hinting at some more consolidation or a correction.

The index is trading above its three EMAs in a bull market. Any correction - if it occurs - will improve the technical 'health' of the chart, and enable it to resume its upward journey.

On longer term weekly chart (not shown), the index closed lower for the second week in a row, but is well above its three weekly EMAs in a long-term bull market for the 46th straight week. All three weekly technical indicators are looking overbought. Only Slow stochastic is showing a bit of upward momentum.

FTSE 100 index chart pattern

On Mon. Jan 16, the daily bar chart pattern of FTSE 100 touched a new intra-day high of 7354, but closed about 11 points lower than its Fri. Jan 13 closing level of 7338.

The 'reversal day' pattern (higher high, lower close) brought an end to the record-breaking rally of 14 straight higher closes. The subsequent fall has been steeper than the climb. (Readers were warned about the story of Icarus in last week's post.)

The index received good support from its 20 day EMA on Thu. & Fri. (Jan 16 & 17), but at the time of writing this post the index has dropped well below its 20 day EMA and has corrected more than 200 points (~3%).

All three daily technical indicators have corrected overbought conditions. MACD is falling below its signal line in positive zone. RSI is seeking support from its 50% level. Slow stochastic has dropped close to its oversold zone.

Some more correction is likely. Support can be expected from the zone between 7000 and 7100.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market for the 30th week in a row. Weekly technical indicators are correcting overbought conditions. 

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