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Monday, May 29, 2017

S&P 500 and FTSE 100 charts (May 26 '17): bears routed - both indices touch lifetime highs

S&P 500 index chart pattern


The following remarks appeared in last week's post on the daily bar chart pattern of S&P 500: "Bears have successfully defended the 2400 level for almost 3 months. However, the next bull charge may overwhelm them."

The index moved up to test its May 16 '17 top of 2406 on Wed. May 24. Next day, the index opened with a small upward 'gap' and rose to touch a new high of 2419, but closed 3 points lower on Fri. May 26 - gaining 1.4% for the week.

Time to celebrate for bulls? Technical headwinds can cause a delay. Volumes have been sliding during the last leg of the rally (from the May 18 low of 2353), which is a bearish sign. 

All three technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index. Slow stochastic is well inside its overbought zone. 

Some consolidation around current levels and a pullback towards 2400 are possibilities. 

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 showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern


The following comments were made in last week's post on the daily bar chart pattern of FTSE 100: "Some consolidation can be expected before the index touches another new high."

The index consolidated sideways within a 60 points range during the first four days of the week before rising up to touch a new high of 7554 on Fri. May 26. It closed just below 7550, with a 1% gain for the week.

Daily technical indicators are looking overbought. Two of them - RSI, Slow stochastic - are showing negative divergences by failing to touch new highs with the index.

The index has been trading within a bearish 'rising wedge' pattern for the past two weeks. If the pattern plays out, expect a correction towards 7400-7450.

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

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