Monday, May 6, 2019

S&P 500 and FTSE 100 charts (May 03, 2019): bulls brush aside bear resistance

S&P 500 index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "Some hesitation and profit booking can be expected near a previous top. Whether that would lead to a breach of the twin support from the rising 20 day EMA and the lower edge of the 'wedge' remains to be seen."

On Wed. May 1, the index touched a new lifetime high of 2954 but formed a 'reversal day' bar (higher high, lower close) and closed at the lower edge of the 'wedge' - below its previous top of 2941.

Bears took advantage. Their selling triggered a breakout and a close below the 'wedge' on Thu. May 2. Note that the index closed above its 20 day EMA despite an intra-day fall below it; i.e. technically, support from the 20 day EMA held firm.

Bulls engineered a sharp pullback on Fri. May 3, ensuring that the index closed inside the 'rising wedge' with a 6 points weekly gain. However, Friday's lower volumes may enthuse bears to try another downward breakout. All three EMAs are rising and the index is trading above them in a bull market.

Daily technical indicators are in bullish zones after correcting overbought conditions. MACD is moving sideways below its signal line. RSI is trying to re-enter its overbought zone after falling below it. Slow stochastic is falling towards its neutral zone. 

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull marketWeekly MACD is rising above its signal line in overbought zone. RSI is slowly rising above its 50% level. Slow stochastic is well inside its overbought zone.

FTSE 100 index chart pattern

After touching a high of 7529 on Apr 23, the daily bar chart pattern of FTSE 100 faced profit-booking. The index dropped below its 20 day EMA, but has bounced up after receiving support from its 50 day EMA.

Daily technical indicators are looking neutral to bearish. MACD is falling below its signal line in bullish zone. RSI is in neutral zone after falling below its 50% level. Stochastic is trying to emerge from its oversold zone, and probably triggered Friday's technical bounce.

The index appears to be forming a large 'cup and handle' pattern, from which the likely breakout is upwards. The 'handle' of the 'cup' is in the process of getting formed. 

If the pattern plays out - with a convincing move above 7500 - much higher index levels (above 8000) are likely in the medium term. A fall below 7000 will negate the pattern.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in long-term bull territory. Weekly technical indicators are in bullish zones, but not showing much upward momentum. MACD is still rising above its signal line. RSI has started to fall towards its 50% levelStochastic is poised to fall from its overbought zone.

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