S&P 500 index chart pattern
The following comment appeared in last week's post on the daily bar chart pattern of S&P 500: "It is just a matter of time before bulls overcome bear resistance at the 2954 level."
A holiday-shortened trading week started well for bulls. On Mon. Jul 1, the index formed an upward 'gap' and broke out above the resistance level of 2954. However, the upward breakout was not accompanied by a significant increase in volumes - keeping the door open for a pullback.
The index rose to touch a new high of 2996 on Jul 3, but faced profit booking and formed a bearish 'hanging man' candlestick on Fri. Jul 5 - closing slightly lower at 2990 with a 1.6% weekly gain.
Daily technical indicators are looking bullish and overbought. MACD is above its rising signal line inside its overbought zone. RSI has slipped down after briefly entering its overbought zone. Slow stochastic has re-entered its overbought zone.
Note that the technical indicators are showing negative divergences by failing to touch new highs with the index. A pullback towards 2954 and/or some consolidation is likely. All three EMAs are rising, and the index is trading well above them in a bull market.
On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking bullish and overbought, and showing negative divergences by failing to touch new highs with the index.
FTSE 100 index chart pattern
The following comment appeared in last week's post on the daily bar chart pattern of FTSE 100: "Technical confirmation of the 'cup and handle' pattern is still awaited..."
By breaking out and closing above the previous (Apr 23) top of 7529 on Jul 2, formation of the 'cup and handle' pattern has been technically confirmed. Note that there was no significant increase in volumes during the upward breakout.
As often happens to an upward breakout without volume support, the rally petered out after the index touched an intra-day high of 7622 on Jul 4. A pullback towards 7529 is in progress. Such pullbacks provide opportunities to add.
Daily technical indicators are in bullish zones but not showing any upward momentum. MACD is rising above its signal line, but its upward momentum has weakened. RSI and Stochastic have dropped from their respective overbought zones.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory for the fifth straight week. Weekly technical indicators are looking bullish. MACD has crossed above its signal line in bullish zone. RSI is rising above its 50% level. Stochastic has entered its overbought zone. Some consolidation or correction is possible.
S&P 500 index chart pattern
Note the following comment in last week's post on the daily bar chart pattern of SPX 500: "Friday's 'outside day' candlestick may be hinting at a continuation of the down trend that started after the index touched its lifetime high of 2954 on May 1."
On Mon. May 13, the index dropped to test support from the 2800 level, and closed below its 50 day EMA. A technical bounce followed during the next three days. The index breached the 20 day EMA intra-day on Thu. May 16, but failed to close above it.
Bears came to the fore on Fri. May 17. The index dropped below its 50 day EMA intra-day, but managed to close just above it.
The index remains in a down trend (marked by purple trend line) that started after the index touched a lifetime high of 2954 on May 1.
Daily technical indicators are in bearish zones. MACD is moving sideways below its falling signal line. RSI has dropped down after facing resistance from its 50% level. Slow stochastic has bounced up from the edge of its oversold zone.
Some consolidation or more correction can be expected.
On longer term weekly chart (not shown), the index dropped below its 20 week EMA, but bounced up to close above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing downward momentum.
FTSE 100 index chart pattern
Note the following comments in last week's post on the daily bar chart pattern of FTSE 100: "The 'cup and handle' pattern has not been negated yet. Daily technical indicators are looking bearish and oversold...and can trigger a technical bounce."
On Mon. May 13, the index touched a low of 7151 and closed below its three EMAs in bear territory at 7164. A technical bounce during the next three days propelled the index to a close above its three EMAs and the 7350 level on Thu. May 16.
On Fri. May 17, the index closed just below 7350 but above its three EMAs in bull territory. However, formation of a small 'hanging man' candlestick can lead to some correction or consolidation.
Daily technical indicators are looking bullish after correcting oversold conditions. MACD is about to cross above its falling signal line in bearish zone. RSI and Stochastic have moved above their respective 50% levels.
A convincing move above the Apr 23 top of 7529 is necessary to complete the 'cup and handle' pattern.
On longer term weekly chart (not shown), the index formed a 'reversal' bar (lower low, higher close) and closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are in bullish zones, and showing slight upward momentum.
FIIs were net buyers of equity on Mon., Wed. and Thu. (Apr 22, 24 and 25), but net sellers on the other two days. Their total net buying was worth Rs 45.2 Billion. DIIs were net buyers of equity on Tue. and Fri. (Apr 23 and 26) but net sellers on the other three days. Their total net selling was worth Rs 36.8 Billion, as per provisional figures.
Five years after launch, the Jan Dhan Yojana scheme has achieved a total balance of nearly Rs 1 Trillion. The scheme got a boost from demonetisation in Nov '16, and gained rapid pace in the last 6 months - leading to scepticism on the possible link between elections and spurt in balances.
A dark storm cloud (read: rising oil prices) has gathered over the Indian stock market. Prices in petrol pumps have not been revised upwards in proportion to the rise in international oil prices due to the ongoing election. After May 23, that cloud is going to burst upon Indian consumers.
BSE Sensex index chart pattern
The following remark appeared in last week's post on the daily bar chart pattern of Sensex: "Some more consolidation near the upper edge of the trading channel, and/or a drop towards the rising 20 day EMA are possibilities."
Sometimes, the index does exactly what you expect it to do. Despite the volatility and the alternate days of sharp rise followed by equally sharp fall, all that Sensex managed was a sideways consolidation that faced resistance from the upper edge of the trading channel and received support from the 20 day EMA.
The entire trading during the month of Apr '19 has occurred within a small 'diamond' pattern, which can be a trend reversal pattern at a market top. However, a 'diamond' can also act as a continuation pattern. So, it is better to wait for the eventual breakout before taking any buy/sell decision.
A 'diamond' pattern has measuring implications. The height of the 'diamond' - about 1200 points - will be the downward or upward target from the eventual breakout point. (For a possible downward breakout, the long-term support level of 37690 - marked by blue dotted line - can come into the picture.)
Daily technical indicators are giving conflicting signals. MACD is falling below its signal line in bullish zone. ROC has crossed above its 10 day MA to enter bullish zone. RSI and Slow stochastic are at their respective neutral zones.
All four technical indicators showed negative divergences by failing to touch new highs when the index touched its lifetime high of 39487 on Apr 18. That is usually an advance warning of a possible change in trend.
FIIs are on a buying spree. A flood of liquidity can throw bearish technical signals out the window. But note that they were net sellers on two days during the week.
Near a lifetime index high, discretion should be the better part of valour. Sensex is trading at a P/E of 29.5 - well above its long-term average. The downside risk is increasing by the day.
NSE Nifty index chart pattern
There is good (bullish) news and bad (bearish) news visible on the weekly bar chart pattern of Nifty. First, the good news: the index closed above the upward-sloping trading channel at a new lifetime high closing level of 11755.
Now, the bad news: For the second week in a row, the index failed to close above its Aug '18 top of 11760. Also, the index has formed a weekly 'hanging man' candlestick that usually has bearish implications.
Weekly technical indicators are looking bullish and overbought. MACD and ROC are rising inside their respective overbought zones. RSI and Slow stochastic are moving sideways inside their respective overbought zones - showing negative divergences by failing to touch new highs with the index.
Remember that an index can remain overbought for long periods. However, the two previous occasions when all four technical indicators were inside their overbought zones - in Jan '18 and Aug '18 - sharp corrections had followed.
History may not repeat itself - but many small investors are doomed by repeating their mistakes of becoming too bullish at a market top.
Nifty's TTM P/E has moved up to 29.34, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone. Some more consolidation or correction is possible.
Bottomline? Sensex and Nifty charts are still hovering near the upper edges of their respective upward-sloping trading channels, and can consolidate or correct some more before moving up further. Stay invested, but control any impulse to buy big.
FIIs were on a buying spree on all three trading days this week. Their total net buying in equity was worth a massive Rs 90.1 Billion. DIIs were net sellers of equity on all three trading days. Their total net selling was worth Rs 44.5 Billion, as per provisional figures.
The Index of Industrial Production (IIP) slowed to 1.7% in Jan '19 from 2.6% in Dec '18 due to deceleration in manufacturing, capital goods, consumer, non-durables and electricity sectors.
Retail (CPI) inflation rose to 2.57% in Feb '19 from 1.97% in Jan '19 due to higher food prices (except vegetables). Lower IIP and higher CPI may force RBI to cut interest rates in its Apr '19 policy meeting.
The daily bar chart pattern of Nifty has shot up like a rocket - fuelled by renewed FII buying. Announcement of dates of general elections, and likely return of NDA for a second term (as per recent polls) has given a big boost to bullish sentiment.
Note that the index has closed above the upper Bollinger Band two days in a row, and also formed a 'hanging man' candlestick today. The two together may be a warning of a potential downward reversal.
Daily technical indicators are looking bullish, and overbought. MACD is rising above its signal line inside its overbought zone. RSI has entered its overbought zone for the first time since Aug '18. Slow stochastic is moving sideways inside its overbought zone, and can trigger a correction.
Remember that an index (or stock) can remain overbought for long periods. That doesn't mean one should throw caution to the winds. The index is just 400 points away from its lifetime high. Charts tend to have 'memory'. Profit booking can emerge as the index approaches 11760.
Nifty's TTM P/E has moved up to 27.80, which is way higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone, and can limit near-term index upside.
Polls have often proved incorrect - probably because of insufficient sample sizes among a heterogenous population. So, they should always be taken with a pinch of salt.
The stock market - and specifically, FIIs - seem certain of a win for NDA. But there have been many a slip between the cup and the lip. NDA was supposed to be a shoo-in in 2004.
FIIs were net sellers of equity on Tue. (Jan 8), but net buyers on Mon. & Wed. (Jan 7 & 9). Their total net buying was worth Rs 4.6 Billion. DIIs were net sellers on Mon. but net buyers on Tue. & Wed. Their total net buying was worth Rs 9.9 Billion, as per provisional figures.
According to a World Bank report, global economic growth is projected to soften from a downwardly-revised 3% in 2018 to 2.9% in 2019 amid rising downside risks.
The bull party may be coming to an end. Indian stocks are headed for another tough year as a shrinking global cash pool dims prospects of an improving economy and expected recovery in company earnings - according to BofAML.
After closing below its three EMAs in bear territory on Thu. Jan 3, the daily bar chart pattern of Nifty formed a 'reversal day' bar (lower low, higher close) on Fri. Jan 4, which triggered four straight days of higher closes.
The index has moved above its 20 day SMA (middle Bollinger Band - marked by dotted green line) and closed above its 50 day and 200 day EMAs in bull territory.
However, today's trading has formed a 'hanging man' candlestick pattern that can bring the four day rally to a close. Those holding long positions may want to book partial profits.
Daily technical indicators are turning bullish. MACD is forming a small 'rounding bottom' pattern below its signal line in bullish zone. RSI and Slow stochastic have moved above their respective 50% levels.
Note that MACD, RSI and Slow stochastic are showing negative divergences by forming bearish patterns of 'lower tops, lower bottoms'.
Nifty's TTM P/E has moved up to 26.15 - which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising in neutral zone - hinting at limited index upside.
Small investors should carefully track Q3 (Dec '18) results that are being announced from this week onwards. Think of buying only those stocks that show visible earnings growth.
(Note: Mid-cap and small-cap stocks have been badly beaten down. Thinking of adding some of them to your portfolio? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers till Jan 21, 2019. Contact me at mobugobu@yahoo.com for details.)
S&P 500 index chart pattern
The following comments were made about the daily bar chart pattern of S&P 500 in last week's post: "...it formed an 'inside day' as well as a 'hammer' candlestick pattern. Bulls appear to be ready for a fight back."
The index dropped below its 200 day EMA on Mon. Oct 15, but managed to close above the support zone between 2737 and 2689 (the significance of these levels were mentioned in last week's post)
. It bounced up to touch an intra-day high of 2817 on Wed. Oct 17, but formed a bearish 'hanging man' candlestick pattern.
Bears used the opportunity to follow a 'sell on rise' strategy. The index dropped to seek support from its 200 day EMA, and closed flat for the week. (At the time of writing this post, the index is desperately trying to stay above its 200 day EMA - but for how much longer?)
Daily technical indicators are looking quite bearish. MACD is falling deeper inside its oversold zone. RSI and Slow stochastic emerged from their respective oversold zones but are moving downwards. Another likely breach of the 200 day EMA can lead to a fall towards the lower edge of the support zone.
On longer term weekly chart (not shown), the index remained below its 20 week EMA but closed above its 50 week and 200 week EMAs 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 sliding down 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: "Stochastic has stopped falling, and can trigger a technical bounce."
It turned out to be a weak bounce. On Mon. Oct 15, the index formed a small 'reversal day' bar (lower low, higher close) by touching an intra-day low of 6961 - its lowest level in 7 months - but closing higher at 7029.
That triggered a small rally, as the index formed a bullish pattern of 'higher tops, higher bottoms'. Bulls needn't get too excited, as the index appears to be forming a bearish 'flag' pattern.
Daily technical indicators are trying to correct oversold conditions. MACD is below its falling signal line in bearish zone, but seems to be forming a bullish 'rounding bottom' pattern. RSI has just emerged from its oversold zone. Stochastic is still inside its oversold zone.
FTSE gained about 0.8% on a weekly closing basis, but is trading below its three EMAs in a bear market. Any further attempt to rally may face resistance from the falling 20 day EMA.
On longer term weekly chart (not shown), the index formed a small 'reversal' bar and just managed to close above its 200 week EMA but well below its 20 week and 50 week EMAs. 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 still inside its oversold zone.
FIIs were net sellers of equity on Mon. Aug 20 but net buyers on Tue. Their total net selling was worth Rs 2.3 Billion. DIIs were net buyers of equity on Mon. and Tue. Their total net buying was worth Rs 7.9 Billion, as per provisional figures.
The US government has announced a preliminary 50% anti-dumping duty on large diameter welded metal pipes imported from India. Last year's imports totalled US $295 Million. A higher duty of 133% has been imposed on China.
In a stern warning, the Finance Ministry has asked CEOs of PSU banks to check all non-performing accounts exceeding Rs 500 Million for fraud, or they could face criminal conspiracy charges.
In a holiday-shortened trading week, the daily bar chart pattern of Nifty rose to touch a new lifetime high on Tue. Aug 21, but formed a small 'hanging man' candlestick pattern that has bearish implications.
The index is trading well above its three rising EMAs in a bull market. However, the widening distance between the 20 day and 200 day EMAs is a sign of overbought conditions that can trigger a correction or consolidation at any time.
Daily technical indicators are looking overbought. MACD has crossed above its signal line in bullish zone. RSI and Slow stochastic have re-entered their respective overbought zones. All three are showing negative divergences by failing to rise higher with the index.
Nifty's TTM P/E has moved up to 28.29 - at its highest level this month and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is trying to move up in neutral zone, and can limit index upside.
Bullish sentiments have received a boost after better corporate Q1 (Jun '18) results. The market has already started discounting better Q2 (Sep '18) results - but whether the actual results will be better or not remains to be seen, as a higher base-effect will kick in.
Mid-cap stocks have started participating in the bull rally, which is a bullish sign. Macro headwinds - viz. high oil price, depreciated Rupee, widening trade deficit, rising interest rates - should induce caution rather than euphoria among small investors.
For the month of Jun '18, FIIs were net sellers of equity worth Rs 102.50 Billion. DIIs were net buyers of equity worth Rs 141.50 Billion, as per provisional figures.
Sensex gained barely 100 points (0.3%) on a monthly closing basis, while Nifty lost 22 points (0.2%) despite strong buying by DIIs.
At US $529 Billion, India’s foreign currency debt at end-Mar '18 rose 2.4% over its level at end-Mar '17, primarily on account of an increase in commercial borrowings, short-term debt and NRI deposits, according to a release by RBI.
BSE Sensex index chart pattern
This was the concluding comment in last week's post on the daily bar chart pattern of Sensex: "As long as bears are able to defend the down trend line, the possibility of a fall towards (and even below) the 132 points 'gap' can't be ruled out."
On Mon. Jun 25, the index made an intra-day attempt to breach the down trend line. Bears stood firm, and sent bulls packing to seek support from the 20 day EMA. On Wed. Jun 27, the index dropped and closed below its 20 day EMA.
On Thu. Jun 28, the expected happened. Sensex not only dropped below its 50 day EMA for the first time in more than a month, but fell inside the 132 points 'gap' before bouncing up to close above it.
The index closed the week and month above its three EMAs in bull territory on the back of huge buying by DIIs - but lost more than 260 points (0.7%) for the week.
Daily technical indicators are looking neutral to bearish. MACD is below its signal line, and is falling towards its neutral zone. ROC is below its 10 day MA, and rising towards its neutral zone. RSI has moved up to its neutral zone after slipping below it. Slow stochastic has dropped to the edge of its oversold zone.
The rising 200 day EMA shows that the long-term chart structure remains bullish. The down trend line, which has dominated the chart for the past 5 months, shows that bears are not ready to give up their near-term advantage.
Stay cautiously optimistic and be very selective. 2018 is not going to be an easy year to make money in the stock market for investors.
NSE Nifty index chart pattern
The bearish 'hanging man' candlestick pattern in the previous week's bar chart pattern of Nifty had given advanced warning of a possible corrective move.
The index faced strong resistance from the down trend line for the third straight week, and corrected below the 33 points 'gap' (formed on Feb 5) and its 20 week EMA before bouncing up to close inside the 'gap'.
Unlike a support or resistance level, which gets weakened with each subsequent test, a trend line gets strengthened by subsequent tests. Bears are using that knowledge to their advantage.
Weekly technical indicators are in bullish zones, but their upward momentum has slowed down. MACD has started to slide down towards its signal line. Slow stochastic has started falling inside its overbought zone. ROC has dropped from its overbought zone and crossed below its rising 10 week MA. Only RSI is showing a bit of upward momentum inside its overbought zone.
For the past 12 weeks, the 20 week EMA has provided down side support to the index. A likely fall below the 20 week EMA can lead to a test of support from the 50 week EMA.
Nifty's TTM P/E has slipped further to 25.9 - which is still well above its long-term average. The breadth indicator NSE TRIN (not shown) is in neutral zone, hinting at some consolidation around current levels.
Bottomline? Bears have dug in their heels and have strongly defended down trend lines on Sensex and Nifty charts. Bulls have failed to budge them so far. Some more consolidation or correction can be expected. Stay on the sidelines till clear trends emerge. Long term trends remain up.
FIIs were net sellers of equity worth Rs 47.4 Billion during the week, though they were net buyers on Thu. Jun 21. DIIs were net buyers of equity worth Rs 47.2 Billion, as per provisional figures. Sensex and Nifty gained marginally on a weekly closing basis.
Out of 21 PSU banks, only 2 - Indian Bank and Vijaya Bank - were able to pay dividends worth Rs 4.44 Billion to the government. This was the worst dividend payout by PSU banks in the past 10 years.
The government is considering a proposal to sell a significant proportion of its stake in IDBI Bank to LIC, and has approached IRDAI for clearance (as LIC already holds more than 10% stake in IDBI and can't hold more than 15% in a single company).
BSE Sensex index chart pattern
The following comments were made in last week's post on the daily bar chart pattern of Sensex: "The 20 day EMA is merging with the lower edge of the 'rising wedge'. That ought to help bulls put up a fight to prevent a likely fall below the 'wedge'."
The index did fall below the 'rising wedge' on Tue. Jun 19 but received support from its 20 day EMA. For the rest of the week, the index continued to receive support from the 20 day EMA but faced resistance from the lower edge of the 'wedge'.
The down trend line is also providing resistance to the index - as it has done for almost 5 months. Sensex closed above its three rising EMAs in bull territory, but needs to move convincingly above the down trend line to attain new highs.
Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is entangled with its signal line and moving sideways. ROC bounced up from its '0' line but remains below its 10 day MA. RSI and Slow stochastic are rising towards their respective overbought zones.
Despite OPEC's decision to increase output on Fri. Jun 22, oil prices shot up as the announced increase was less than expectations. Progress of the monsoon across India has been slow. These are worrying signs that inflation may continue to rise.
Bull markets are supposed to take all worries in stride. However, caution is advised. As long as bears are able to defend the down trend line, the possibility of a fall towards (and even below) the 132 points 'gap' can't be ruled out.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty dropped to seek support from the 33 points downward 'gap', but bounced up to close with a weekly gain for the 5th week in a row.
The down trend line again provided strong resistance. Nifty's weekly bar formed a bearish 'hanging man' candlestick pattern. Volume bars are showing negative divergence by touching lower tops.
Weekly technical indicators are in bullish zones. MACD has started to rise above its signal line. RSI is facing resistance from the edge of its overbought zone. Slow stochastic has entered its overbought zone.
However, ROC is about to cross below its rising 10 week MA, and has slipped down from its overbought zone. Some correction or consolidation is likely.
Nifty's TTM P/E has slipped down to 26.63 - still well above its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at some consolidation around current levels.
Bottomline? Bears strongly defended down trend lines on Sensex and Nifty charts. Bulls are pushing them to the limit of their resistance. Some more consolidation or correction can be expected in F&O expiry week. Stay on the sidelines till clear trends emerge. Long term trends remain up.
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.
S&P 500 index chart pattern
The daily bar chart pattern of S&P 500 had broken out below the 'rising wedge' pattern intra-day on Fri. Apr 20, but managed to close exactly at the lower edge of the 'wedge'.
On Mon. Apr 23, the index attempted a pullback that faced twin resistances from the lower edge of the 'wedge' and the 50 day EMA. The index slipped down to close below the 'rising wedge' at Friday's closing level of 2670.
That was a signal for bears to attack. The index dropped sharply towards its 200 day EMA intra-day on Tue. Apr 24, before recovering to close at 2635. On Wed. Apr 25, the index dropped lower intra-day - testing support from its 200 day EMA - and bounced up to close slightly higher at 2639.
The 'reversal day' bar (lower low, higher close) triggered a brief rally that faced strong resistance from the 50 day EMA. The index ended absolutely flat on a weekly closing basis.
Daily technical indicators are looking neutral to bearish, and are not showing any upward momentum. MACD is trying to rise above its signal line in bearish zone. RSI and Slow stochastic are at their respective 50% levels after brief dips into bearish zones.
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 longer term weekly chart (not shown), the index formed a 'hanging man' candlestick and closed exactly at its 20 week EMA for the second week in a row, but 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 7440 level on Tue. Apr 24 but failed to cross above it. Bears forced a temporary pullback to the 200 day EMA on Wed. Apr 25.
The index found strong support at its long-term average and rallied past 7440 and the psychological 7500 level on Fri. Apr 27 - gaining 1.8% on a weekly closing basis.
By closing at 7502 - above the Fibonacci 61.8% retracement level of its entire 916 points fall (refer last week's post) - the index is on the verge of reversing the down trend from the Jan 12 top.
The 20 day EMA is about to cross above the 200 day EMA. The 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market.
All three daily technical indicators are inside their overbought zones and showing upward momentum. The index rally is not over yet. However, some consolidation or correction will improve the technical 'health' of the chart. (At the time of writing this post, the index is trading 40 points higher.)
On longer term weekly chart (not shown), the index closed above its merged 20 week and 50 week EMAs, and well above its 200 week EMA in a long-term bull market. Weekly MACD and RSI are rising in bearish zones. Slow stochastic is in bullish zone.
