Monday, September 3, 2018

S&P 500 and FTSE 100 charts (Aug 31, 2018): bulls on top but bears still fighting

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 brushed aside technical headwinds by opening with a small upward 'gap' on Mon. Aug 27, and rose to touch a new high of 2916.50 on Wed. Aug 29.

A bit of profit booking dropped the index below the 2900 level, but by end of trade on Fri. Aug 31, the index closed just above 2900 with a weekly gain of 0.9%. The index is trading above its three rising EMAs in a bull market.

There can be three possible index moves here onwards - two bullish and one bearish. The index can remain above Monday's small 'gap' and continue upwards. It can correct a bit more to fill the 'gap' and then resume its up move.

However, the index can correct to form a downward 'gap' that overlaps Monday's upward 'gap'. In which case, the entire trading above the small 'gap' will form a bearish 'island reversal' pattern. Such a pattern is rare - hence has a low probability of forming.

Nevertheless, investors should be aware of the possibility. Daily technical indicators are in the process of correcting overbought conditions. MACD is above its signal line in overbought zone, but has stopped rising. RSI has slipped down after entering its overbought zone. Slow stochastic has started correcting inside its overbought zone.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are showing upward momentum but looking overbought. The index penetrated its upper Bollinger Band (not shown). The last time it did that was in the last week of Jan '18. A sharp corrective move had followed. 

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 continued with its sideways consolidation within a downward-sloping trading channel.

The index dropped below the 7500 level and closed below its 200 day EMA in bearish zone. (At the time of writing this post, the index is pulling back towards 7500.)

Daily technical indicators are looking bearish. MACD is below its falling signal line in bearish zone. RSI is falling below its 50% level. Stochastic has dropped inside its oversold zone, and may trigger a technical bounce.

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 is falling below its signal line in bullish zone. RSI is falling towards its 50% level. Slow stochastic has dropped inside its oversold zone.

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