Monday, March 5, 2018

S&P 500 and FTSE 100 charts (Mar 02, 2018): bears taking over control

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 rose to touch a lower top of 2789 on Tue. Feb 27 and closed below the 2750 level - forming a 'reversal day' bar (higher high, lower close) that often marks an intermediate top.

Bears took the opportunity to do some serious selling. The index dropped below its 20 day and 50 day EMAs to an intra-day low of 2660 on Thu. Mar 1 before closing above 2675.

On Fri. Mar 2, the index dropped lower to 2647 but closed higher at 2691 - forming another 'reversal day' bar (lower low, higher close) which may bring only a temporary respite for bulls.

Daily technical indicators are looking bearish. MACD has moved down to merge with its signal line in bearish zone. RSI has moved below its 50% level. Slow stochastic has fallen sharply from its overbought zone and is showing downward momentum.

Trump's threat of a trade war by introducing import tariffs on steel and aluminium has provided fresh impetus to bears. Expect some more correction and perhaps a test of the Feb 9 low of 2533.

If 2533 gets breached on the downside, a bearish pattern of 'lower tops, lower bottoms' will get formed. A deeper correction will be the likely outcome.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market, but formed a weekly 'reversal' bar (higher high, lower close). Weekly technical indicators are in bullish zones. MACD and RSI are moving down. Only Slow stochastic is showing slight upward momentum.

FTSE 100 index chart pattern

Bears are taking control of the daily bar chart pattern of FTSE 100. By closing at 7070 on Fri. Mar 2 - below the long-term support level of 7100 (marked by purple horizontal line) - the index is falling into a bear market.

The 'death cross' of the 50 day EMA below the 200 day EMA (marked by purple oval) has technically confirmed a bear market. (At the time of writing this post, the index has pulled back to the 7100 level but has failed to cross above it.)

Daily technical indicators have turned bearish. MACD is about to cross below its signal line in bearish zone. RSI is falling in bearish zone. Slow stochastic has dropped sharply towards its oversold zone.

Bears can be expected to sell on every rise. A deeper correction is on the cards.

On longer term weekly chart (not shown), the index closed below its 20 week and 50 week EMAs but above its 200 week EMA in a long-term bull market. Weekly MACD and Slow stochastic are looking oversold. RSI has slipped below its 50% level.

No comments: