Monday, January 29, 2018

S&P 500 and FTSE 100 charts (Jan 26, 2018): bulls rule one, bears rule the other

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 defied gravity as it continued its parabolic rise to a new intra-day and closing high. The rise during Jan '18 has been almost vertical with bulls using the briefest of corrections to buy.

Daily technical indicators are looking extremely overbought. Slow stochastic is showing negative divergence by failing to rise higher with the index.

Remember that an index can remain overbought for long periods - particularly when fuelled by liquidity and earnings growth. However, the widening distance (nearly 250 points) between the 20 day EMA and the 200 day EMA is technically 'unhealthy'.

A sharp fall towards the 50 day EMA can occur at any time. Booking partial profits, and/or holding with a tight trailing stop-loss will protect profits. Strong volumes on the few recent down days indicate bears are active.

On longer term weekly chart (not shown), the index closed at another new high - way above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking very overbought. The index seems poised for a sharp correction. 

FTSE 100 index chart pattern

Bears tried to tighten their grip on the daily bar chart pattern of FTSE 100. The index had bounced up after receiving good support from its 20 day EMA, but fell sharply to its 50 day EMA on Thu. Jan 25.

The index recovered on Fri. Jan 26, but ended the week with a loss of 0.8% on a weekly closing basis.

Daily technical indicators are looking neutral to bearish. MACD is falling below its signal line in bullish zone. RSI has turned up to its neutral zone after falling below its 50% level. Slow stochastic has entered its oversold zone, and can trigger a technical bounce.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market despite correcting for the past two weeks. Weekly technical indicators are in bullish zones but showing downward momentum.

1 comment:

Subhankar said...

Don't let such articles lull you into complacency! Maintain trailing stop-losses.

Why 'Overbought' Stock Market Can Rise 130%: Oppenheimer

The Bull Market Will Last Another Decade: Fundstrat