Monday, February 19, 2018

S&P 500 and FTSE 100 charts (Feb 16, 2018): bulls fighting back

S&P 500 index chart pattern

The following comments were made in last week's post on the daily bar chart pattern of S&P 500: "...the index has fallen like a stone from its Jan 26 top. Such a steep fall can't be sustained. Expect some pullback and consolidation on short-covering and bottom fishing. That will provide an exit opportunity from a short-term perspective."

The expected pullback turned into a sharp rally as bulls fought back and propelled the index above its three EMAs into bull territory. Is the correction over?

The index has retraced 65% of its 340 points fall from the Jan 26 top (2873) to the Feb 9 low (2533). That is more than the 61.8% Fibonacci retracement level that is considered by technical traders as a trend reversal level.

However, on a closing basis the (292 points) correction has been retraced 52% - a bit more than the 50% Fibonacci retracement level. Also, by closing near the opening and intra-day low level on Fri. Feb 16, the index formed a 'shooting star' candlestick that has bearish implications.

Daily technical indicators have corrected oversold conditions, but MACD is still in bearish zone and RSI is in neutral zone. Slow stochastic has entered bullish zone above its 50% level.

Note that last week's steep rally was on sliding volumes. The rally may be losing steam. That will be just the incentive bears need to go on the offensive once again.

On longer term weekly chart (not shown), the index bounced up after receiving good support from its 50 week EMA, and closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators have corrected extremely overbought conditions. MACD has crossed below its signal line in bullish zone. RSI has bounced up after receiving support from its 50% level. Slow stochastic is seeking support from its 50% level.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 had formed a small 'double bottom' reversal pattern by touching an intra-day low of 7073 on Fri. Feb 9. Technical indicators were looking bearish and oversold, which had hinted at a technical bounce towards the 200 day EMA.

The technical bounce occurred as expected, but stopped well short of the 200 day EMA due to strong resistance from the 7300 level. (At the time of writing this post, the index is hovering near the 7300 level - marked by purple horizontal line.)

Daily technical indicators have corrected oversold conditions, but remain in bearish zones. MACD is about to cross above its signal line. RSI has bounced up after receiving support from the edge of its oversold zone. Slow stochastic has started to move up after forming an 'inverse head-and-shoulders' reversal pattern inside its oversold zone.

The 50 day EMA is falling towards its 200 day EMA. Both will provide resistance to the index if it tries to rally further. Despite last week's pullback, bears have retained their advantage.

On longer term weekly chart (not shown), the index closed below its 20 week EMA and 50 week EMAs but above its 200 week EMA in a long-term bull market. Weekly MACD and Slow stochastic are in bearish zones. RSI is showing downward momentum in bullish zone.

1 comment:

Subhankar said...

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