Monday, April 9, 2018

S&P 500 and FTSE 100 charts (Apr 06, 2018): attempts at bull rallies get 'Trump-ed' by bears

S&P 500 index chart pattern

The following comment was made in last week's post on the daily bar chart pattern of S&P 500: "Expect the falling 20 day and 50 day EMAs to provide resistance if the index tries to rally."

After falling and closing below its 200 day EMA for the second time in 6 trading sessions on Mon. Apr 2, the index attempted a rally during the next three days and moved above 2670 intra-day on Thu. Apr 5.

Resistance from the falling 20 day EMA prevented the rally from progressing further. More trade sanctions against China announced by Trump was just the excuse bears needed to sell.

On Fri. Apr 6, the index fell sharply below its 200 day EMA intra-day, but bounced up to close just above it  - losing about 1.4% on a weekly closing basis.

Daily technical indicators have corrected oversold conditions, but remain in bearish zones and are not showing any upward momentum. Bulls are desperately trying to defend the 200 day EMA. The volume bars show that their resolve is weakening.

Some technical experts have suggested that the index has formed a 'double bottom' reversal pattern, and the correction is over. Is it? Trading volumes suggest otherwise. 

Volumes during formation of the first bottom (at 2533 on Feb 9) were much higher than on Apr 2, when the index touched the second bottom of 2554. For a 'double bottom' to be technically valid, volumes during formation of the second bottom should be higher.

On longer term weekly chart (not shown), the index fell below its 50 week EMA intra-week, but managed to close above its 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are looking bearish and showing downward momentum.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 rallied past its falling 20 day EMA and the resistance level of 7100 during the week. Oversold weekly technical indicators may have triggered the rally.

Twin resistances from the falling 50 day EMA and the 7200 level brought the rally to a halt. Though the index closed below 7200, it gained 1.8% on a weekly closing basis. (At the time of writing this post, the index is struggling to cross above 7200.)

Daily MACD and RSI are showing upward momentum in bearish zones. Slow stochastic has entered its overbought zone, which is a bearish sign. Some consolidation between 7100 and 7200 is possible.

The 'death cross' (marked by blue circle) of the 50 day EMA below the 200 day EMA had technically confirmed a bear market. Bears will continue to 'sell on rise'.

On longer term weekly chart (not shown), the index closed above its 200 week EMA, but below its 20 week and 50 week EMAs. The 20 week EMA has crossed below the 50 week EMA after 20 months. Weekly technical indicators are correcting oversold conditions. 

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