Monday, May 7, 2018

S&P 500 and FTSE 100 charts (May 04, 2018): bears fight to retain their advantage

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 stayed above its 200 day EMA in bull territory for three straight weeks. But as long as it trades below 'GAP 1' and 'GAP 2', bears may continue to 'sell on rise' to retain their advantage."

On Mon.Apr 30, the index rose above its falling 50 day EMA intra-day, but bear selling caused a drop below the 50 day and 20 day EMAs. A 'reversal day' bar (higher high, lower close) got formed, which triggered a sharp correction and an intra-day fall below the 200 day EMA and the 2600 level on Thu. May 3.

On Fri. May 4, the index recovered smartly but faced resistance from the falling 50 day EMA and closed 6 points lower for the week. Bulls will take solace from the fact that the index closed above its 200 day EMA for the 4th straight week. 

However, resistances from the (purple) down trend line and the three 'gaps' (GAP 1, GAP 2 and the filled GAP 3) need to be overcome convincingly before the index can return to its bullish glory days of last year.

Daily technical indicators are looking bearish to neutral, but showing slight upward momentum that is hinting at some more upside. 

On longer term weekly chart (not shown), the index bounced up after receiving support from its 50 week EMA and closed just below its 20 week EMA - forming a 'hanging man' candlestick for the second week in a row. It closed above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is falling below its signal line in bullish zone. RSI is in neutral zone. Slow stochastic has bounced up from the edge of its oversold zone but remains in bearish zone. 

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 tested resistance from the long-term resistance zone between 7565 and 7582 on Wed. Mar 2 and Fri. Mar 4. It closed near the lower edge of the resistance zone with a weekly gain of 0.8%.

The 20 day EMA has crossed above the 200 day EMA. The 50 day EMA is about to do likewise. The 'golden cross' will technically confirm a return to a bull market. 

All three daily technical indicators are inside their overbought zones. An index can remain overbought for long periods. However, a likely correction or consolidation will improve the technical 'health' of the chart and enable the index to rise to a new high. 

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market. Weekly MACD and RSI are rising in bearish zones. Slow stochastic is rising in bullish zone.

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