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Monday, March 13, 2017

S&P 500 and FTSE 100 charts (Mar 10 '17): corrections out of the way - new highs in sight

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 had its first decent correction in more than a month. The index received good support from its rising 20 day EMA after correcting 2% from its lifetime high of 2401.

The upward 'gap' formed on Mar 1 has been completely filled. The index is trading above its three rising EMAs in a bull market. The next leg of the up move should resume soon.

Daily technical indicators have corrected overbought conditions. MACD has crossed below its falling signal line. RSI has dropped from its overbought zone but is showing a bit of upward momentum. 

Slow stochastic has fallen below its 50% level into bearish zone, and showing negative divergence by touching a lower bottom than its Feb '17 low.

A likely increase in interest rate by the US Fed should propel the index higher.

On longer term weekly chart (not shown), the index closed lower after six straight weeks of gains, but is trading well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are still looking overbought, and hinting at some consolidation. 

FTSE 100 index chart pattern


The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: "The formation of a 'doji', followed by a lower close may trigger a pullback towards the top of the 'symmetrical triangle'. The likely dip can be used to buy."

As if on cue, the index started a pullback. On Thu Mar 9, the index fell sharply below its rising 20 day EMA to touch an intra-day low of 7264 but bounced up to close 50 points higher.

Smart traders used the dip to buy. The index closed at 7343, losing just 0.4% for the week. (At the time of writing this post, the index is showing clear signs of having resumed its up move.)

Daily technical indicators have corrected overbought conditions, but remain in bullish zones. The index is trading above its three rising EMAs in a bull market.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking overbought.

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