Monday, October 29, 2018

S&P 500 and FTSE 100 charts (Oct 26, 2018): bears are taking control

S&P 500 index chart pattern

The following remark was made in last week's post on the daily bar chart pattern of S&P 500: "Another likely breach of the 200 day EMA can lead to a fall towards the lower edge of the support zone."

The fall below the 200 day EMA was steeper than expected. On Fri. Oct 26, the index touched an intra-day low of 2628 and closed 30 points below the 61.8% Fibonacci retracement level of 2689. The strong volumes indicate that the index may fall lower.

The index is trading well below its three falling EMAs in bear territory. It seems that the entire 'Trump rally' - from the small 'double bottom' reversal pattern formed during Jan-Feb '16 to the 'double top' reversal pattern formed during Sep-Oct '18 - is facing correction, with a possible drop to the zone between 2400 and 2500.

Daily technical indicators are looking bearish and oversold. MACD is falling deeper inside its oversold zone. RSI is about to re-enter its oversold zone. Slow stochastic has re-entered its oversold zone. RSI and Slow stochastic are showing positive divergences by not falling lower with the index. A likely technical bounce may face more selling by bears.

On longer term weekly chart (not shown), the index closed below its 20 week and 50 week EMAs but well above its 200 week EMA in a long-term bull market. Weekly technical indicators are showing downward momentum. MACD is falling below its signal line in bullish zone. RSI is falling below its 50% level. Slow stochastic is about to enter its oversold zone. 

FTSE 100 index chart pattern

The following comment appeared in last week's post on the daily bar chart pattern of FTSE 100: "Bulls needn't get too excited, as the index appears to be forming a bearish 'flag' pattern."

The index faced resistance from its falling 20 day EMA and then broke out below the bearish 'flag' (shaded) to touch an intra-day low of 6852 on Fri. Oct 26 - breaching its Mar 26 low - before recovering to close at 6940. 

Daily technical indicators are correcting oversold conditions. MACD has crossed above its falling signal line in bearish zone, and seems to be forming a bullish 'rounding bottom' pattern. RSI and Stochastic have emerged from their respective oversold zones. A technical bounce is likely. (At the time of writing this post, the index is trading 90 points higher.)

On longer term weekly chart (not shown), the index closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. RSI has emerged from its oversold zone. Stochastic is trying to do the same.

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