S&P 500 and FTSE 100 charts (Aug 03, 2018): bulls remain on top but bears refusing to give up

S&P 500 index chart pattern

On Jul 25, the daily bar chart pattern of S&P 500 had partly filled the 13 points downward 'gap' formed on Jan 30. Bear resistance led to a brief correction. 

The index received twin support from its rising 20 day EMA, and the support/resistance zone between 2780 and 2800. Formation of a small 'double bottom' reversal pattern led to a technical bounce.

The index closed at 2840 - just inside the 'gap' and above its three rising EMAs in a bull market. A convincing move (i.e. accompanied by strong volume support) above the 'gap' is required for the index to rise to new highs.

Daily technical indicators are looking bullish. MACD is trying to cross above its signal line. RSI and Slow stochastic are showing upward momentum. Bears are likely to put up a fight to defend the 'gap', but may be on the verge of getting vanquished.

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

FTSE 100 index chart pattern

After touching a lifetime high of 7903.50 on May 22 '18, the daily bar chart pattern of FTSE 100 had been consolidating sideways and appeared to be forming a 'saucer' or a 'cup and handle' pattern. 

Sharp corrections on Wed. & Thu. (Aug 1 & 2) dropped the index below its 20 day and 50 day EMAs, which may have negated both those patterns. The index is trading above its rising 200 day EMA in a bull market.

Daily technical indicators are looking neutral to bearish. MACD and RSI are in neutral zones and showing slight downward momentum. Stochastic has fallen below its 50% level after forming a 'triple top' reversal pattern inside its overbought zone.

Expect the consolidation to continue for some time. A test of support from the 200 day EMA is also a possibility.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly MACD has crossed below its signal line in bullish zone. RSI is falling in bullish zone. Slow stochastic has dropped below its 50% level.

Sensex, Nifty charts (Apr 20, 2018): counter trend rallies pause at resistance zones

FIIs were net sellers of equity on all five trading days. Their total net selling during the week was worth Rs 28.2 Billion. DIIs were net buyers of equity on four out of the five trading days. Their net buying was worth Rs 21.2 Billion.

Sensex and Nifty are in the midst of counter-trend rallies that have paused after retracing 50% of their entire falls from their Jan '18 tops to their Mar '18 lows. Sensex gained 0.65% and Nifty gained 0.8% on a weekly closing basis.

As per a report by the PHD Chamber of Commerce, after-effects of demonetisation and delays in GST refunds curtailed India's exports in FY 2017-18 amid a revival in global demand. A moderate 10% growth in exports led to a 45% jump in India's trade deficit.

In the Jan-Mar '18 period, there were 205 PE (Private Equity) deals worth US$ 4.0 Billion. In the same period a year ago, 196 deals involved US$ 2.27 Billion, according to a report by tax and advisory firm Grant Thornton. 

BSE Sensex index chart pattern

The counter-trend rally on the daily bar chart pattern of Sensex appears to have hit a road block at the 34450 level - which is the upper boundary of the 'resistance zone' (marked by dotted rectangle).

Bears were expected to defend the 'resistance zone', and they have done it thus far. The (blue) up trend line from the Mar '18 low has admirably supported the counter-trend rally.

The index is at the important technical level of 34450, which happens to be the 50% Fibonacci retracement level of the entire fall from the Jan 29 top to the Mar 23 low. Technical traders often treat the 50% retracement level as a trend-deciding level.

The 20 day EMA has crossed above the 50 day EMA, and all three EMAs are rising - with the index trading above them in a bull market. However, daily technical indicators are looking overbought and hinting at a near-term correction.

MACD is rising above its signal line in bullish zone, but its upward momentum is decelerating. ROC has formed a 'triple-top' reversal pattern inside its overbought zone and dropped below its 10 day MA. RSI may be forming a 'double-top' reversal pattern inside its overbought zone. Slow stochastic has started to correct inside its overbought zone.

Bears are getting ready to reverse the counter-trend rally. In case the rally continues, expect strong resistance from the 132 points 'gap' formed on Feb 5. Partial profit booking may be a good idea. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty crossed above the 'resistance zone' between 10490 and 10550, and just managed to close above the zone in bull territory. But bulls need not get overjoyed.

Note that trading volumes have been falling for the past three weeks. The counter-trend rally from the Mar '18 low is obviously losing steam.

Weekly technical indicators are looking neutral to bullish. MACD is trying to move up in bullish zone, but remains below its falling signal line. ROC has crossed above its 10 week MA. RSI is facing resistance from its 50% level. Slow stochastic is rising towards its 50% level.

Any further continuation of the counter-trend rally is expected to receive strong resistance from the 33 points downward 'gap' formed on Feb 5. Bears will remain in charge as long as the index trades below the 'gap'.

Nifty's TTM P/E has moved up to 26.22 - which is much above its long-term average. The breadth indicator NSE TRIN (not shown) has bounced up from the edge of its oversold zone, and can trigger a correction. 

Bottomline? Sensex and Nifty charts are in the midst of counter-trend rallies that have paused at resistance zones - as if waiting for improvement in Q4 (Mar '18) corporate results before deciding on their next directional moves. High oil prices, a weakening Rupee and a widening trade deficit doesn't augur well for India's economic growth. Some correction and/or consolidation is likely. 

Sensex, Nifty charts (Nov 10, 2017): bears make their presence felt

FIIs were net sellers of equity worth Rs 40.4 Billion during the week; DIIs were net buyers of equity worth Rs 28.8 Billion, as per provisional figures. Their roles were reversed during the first two days of the week, as FIIs were net buyers of equity while DIIs turned net sellers.

Sensex and Nifty touched new highs but faced profit booking and closed lower for the week - by 1.1% and 1.25% respectively. Some more correction can't be ruled out.

Continuing impact of demonetisation and GST slowed industrial growth in Sep '17. The IIP number was 3.8% against 4.5% (revised from 4.3%) in Aug '17 and 5.7% in Sep '16. For the Apr-Sep '17 period, IIP was down 11.7% from the same period last year.

BSE Sensex index chart pattern

The following remarks were made in last week's post on the daily bar chart pattern of Sensex: "...negative divergences in three of the four indicators should be treated as a warning sign. A pullback towards the top of the sideways consolidation channel is a possibility."

The index touched a new high of 33866 on Tue. Nov 7, but formed a 'reversal day' bar (higher high, lower close) that triggered a correction. The 20 day EMA is providing good support, raising bullish hopes of a shallow correction. 

Daily technical indicators have dropped from their overbought zones. MACD has crossed below its signal line. ROC formed a 'triple top' reversal pattern and crossed below its 10 day MA. RSI slipped down from its overbought zone but is trying to re-enter it. Slow stochastic is falling towards its 50% level.

Some more correction towards the top of the downward-sloping channel is a possibility. Note that the 50 day EMA is just above the channel, and should provide additional support.

The index is trading above its three rising EMAs in a bull market. The correction is providing an adding opportunity.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty touched a new intra-week high (10490) but formed a 'reversal bar' (higher high, lower close) that often signals an intermediate top.

The index is trading above its three rising weekly EMAs in a bull market. Weekly MACD and Slow stochastic are moving sideways inside their respective overbought zones. ROC and RSI are sliding down in bullish zones.

The index may correct a bit more. Expect strong support from the 'support zone' between 10100 and 9700. The rising 20 week EMA is inside the 'support zone' and should provide additional support.

Nifty's TTM P/E has slipped down to 26.35, but remains well above its long-term average. The breadth indicator NSE TRIN (not shown) is poised to re-enter its overbought zone and can limit immediate upside.

GST on several items have been brought down from the highest slab rate of 28%. That may lead to some buoyancy in the index next week.

Bottomline? Sensex and Nifty charts show the effects of profit booking after touching new highs again. The corrections are expected to be shallow, and can be used as adding opportunities. But don't bet the farm.

Gold and Silver charts: bull rallies hit the pause button

Gold chart pattern

The following remarks appeared in the previous post on the daily bar chart pattern of Gold: "The pullback rally is probably on its last legs. Profit booking can begin at any time."

Gold's price rose to 1280.30 on Tue. Aug 1. Profit booking started from the next day. Gold's price dropped to its rising 20 day EMA on Tue. Aug 8.

The falling US Dollar index and nuclear war rhetoric from North Korea gave a boost to gold bulls. Gold's price bounced up to touch a slightly lower top of 1298.10 on Fri. Aug 11 - testing but failing to overcome the strong resistance level of 1300.

Daily technical indicators are in bullish zones, but looking overbought. RSI and Slow stochastic are showing negative divergences by failing to rise higher with gold's price.

The US Dollar index has subsequently risen to its highest level since Jul 27. Bears have taken the opportunity to sell. At the time of writing this post, gold futures are trading lower around 1281.

The resistance level of 1300 has been tested twice. A resistance (or support) level gets weakened by each subsequent test. Expect bears to defend the 1300 level strongly.

Any fall below the Jul 10 low of 1204 will be very bearish because it will turn the Apr, Jun and Aug '17 tops into a 'triple top' reversal pattern. So, the battle lines between bulls and bears are clearly drawn.

On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are in bullish zones, but their upward momentum is reducing.

Silver chart pattern

The daily bar chart pattern of Silver appears to have formed a bullish 'inverse head and shoulders' pattern with a 'neckline' at 16.90.

Note that silver's price broke out above the 'neckline' and its 200 day EMA with good volume support - which technically validates the breakout .

However, silver's price has failed to rise higher after touching a high of 17.24 on Thu. Aug 10. Daily technical indicators are looking bullish, but Slow stochastic is showing negative divergence by touching a lower top while silver's price rose higher.

Bears are using the opportunity to sell. At the time of writing this post, silver futures are trading lower at 16.85 - below its 200 day EMA, and testing support from the 'neckline' at 16.90.

A deeper fall below its 20 day and 50 day EMAs will negate the 'inverse head and shoulders' pattern - giving back control of the chart to bears. Bulls may defend the 16.90 level to try and prevent a deeper fall.

On longer term weekly chart (not shown), silver’s price closed above its 20 week and 50 week EMAs, but below its 200 week EMA in a long-term bear market. Weekly MACD has crossed above its signal line in bearish zone. RSI is in neutral zone. Slow stochastic is rising towards its overbought zone and showing upward momentum.

Technical updates – Maharashtra Seamless and Ratnamani Metals

The global economic slowdown - particularly in China - had severely affected the metals sector. Prices plummeted due to lower demand. Stocks of steel and aluminium companies were hit hard. Stocks of metal pipes and tubes sector also suffered badly. 

But with the government beginning to open its purse strings for infrastructure projects and removing hurdles for stuck projects, things are beginning to look up for the metals sector.

The 3 year closing charts of Maharashtra Seamless and Ratnamani Metals clearly show that all the losses during their respective bear phases have been recovered. Both stocks are poised to rise to new highs.

Maharashtra Seamless

The stock had closed at a high of 358 on Sep 9 '14, but formed a 'triple top' reversal pattern during Aug-Sep '14 that triggered a bear phase that lasted almost 18 months. 

The stock closed at a low of 132 on Feb 29 '16. Note that all four technical indicators showed positive divergences by touching higher lows inside their oversold zones.

A sharp price spike on Apr 4 '16 took the stock above its three EMAs into bull territory. The subsequent rally received good support from the 200 day EMA. The previous top of 358 was touched on Mar 6 '17, but the stock formed a 'double top' reversal pattern by touching 357 on Apr 5 '17.

A bull market correction/consolidation is under way. The company declared decent Q4 (Mar '17) numbers but for FY 16-17, top line and bottom line were lower by 17% and 5% respectively. Valuation looks a bit high.

Ratnamani Metals

The stock had closed at a high of 783 on Mar 3 '15 before dropping into a bear phase that ended almost a year later when the stock closed at a low of 404 on Feb 19 '16.

Oversold technical indicators and positive divergences on RSI and Slow stochastic triggered a rally that took the stock to a new high of 811 on May 3 '17. Disappointing Q4 (Mar '17) results led to a sharp sell off.

The stock dropped below its 20 day and 50 day EMAs to a low of 705 on May 23 '17. Oversold technical indicators have initiated a partial price recovery. For FY 16-17, top line grew by 17.5% and bottom line by 6.1%.

Valuation is on the expensive side. Another dip towards the 200 day EMA may provide a better entry opportunity.

Stock Chart Pattern: Akzo Nobel (ICI) India – An Update

The Indian paints industry is dominated by Asian Paints - with more than 50% market share. Akzo Nobel (formerly ICI) India is an 'also ran' with 11% market share - behind Berger Paints (19%) and Kansai Nerolac (15%).

So, what is the investment rationale for this company? It is part of the largest paints and coatings company in the world, and has been gradually rationalising its India operations and slowly gaining market share.

Valuation looks more attractive than its larger competitors. Through organic (greenfield and brownfield) as well as inorganic expansions, the company has been growing at a 20% CAGR over the past 5 years (against an industry average of 12%).

The daily bar chart pattern of Akzo Nobel India had completed a large 'double bottom' reversal pattern around 1200 in Feb '16, and rallied strongly  to touch a lifetime high of 1740 on Aug 31 '16.

Note that all four daily technical indicators showed negative divergences (marked by blue arrows) by touching lower tops while the stock touched its lifetime high.

Over the next two months, a 'triple top' reversal pattern was formed. That initiated a correction which was exacerbated be Modi's demonetisation announcement in Nov '16.

The stock price dropped sharply below its three EMAs into bear territory, and touched a low of 1375 on Nov 23 '16. After some sideways consolidation, it dropped even lower to 1328 on Jan 16 '17.

Note that three of the technical indicators - MACD, ROC, RSI - showed positive divergences (marked by blue arrows) by touching higher bottoms while the stock price dropped lower.

That was a trigger for the stock to start its recovery. Resistance from the long-term 'support-resistance' level of 1460 has been overcome. The 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market.

The stock may consolidate or correct a little before resuming its up move. The company has a history of strong cash flows and good dividend payments. Patient investors can think about adding it to their portfolios.

Sensex is recovering after a year-long bear phase; which sectors will lead the next rally?

After touching a lifetime high in Mar '15, Sensex entered a down trend which has not yet been reversed after 13 months. However, the index has formed a small 'double bottom' reversal pattern in Feb '16 and been in a recovery mode since then.

Almost all sectoral indices have been affected by the prolonged down trend to a greater or lesser extent. As always, there are exceptions. One sectoral index has been in an up trend for the past 2 years. Another has been in a sideways consolidation for the past 13 months. Risk averse investors can buy the better stocks from these two sectors.

Those with a penchant for risk can play contrarian by picking stocks from the sectors that are on the road to recovery. Prudence demands that sectors still in doldrums should be avoided. 

BSE Auto Index

BSE Auto touched a 2 years high in Jan '15 and has been in a down trend since then. Thanks to lower petrol and diesel prices and a falling interest rate regime, auto sales are picking up. Even CV sales are on the rise, indicating economic recovery. The index is in bull territory above its three EMAs, but haven't yet reversed the down trend (marked by blue down trend line).

BSE Bankex

BSE Bankex also touched a 2 years high in Jan '15, and has been in a down trend since then. Its recovery from its Feb '16 low has stalled near its falling 200 day EMA. Large NPAs of PSU banks have kept the index subdued. Comparatively, private banks are performing much better.

BSE Capital Goods Index

BSE Cap. Goods touched a 2 years high in Jul '15, only to suffer a sharp correction. After dropping to a 2 years low in Feb '16, the index formed a 'double bottom' reversal pattern and moved convincingly above the blue down trend line. However, it is trading well below its falling 200 day EMA in bear territory.

BSE Consumer Durables Index

BSE Consumer Durables has been in a bull market for the past 2 years, pleasantly surprising the market with its counter-trend performance. The index touched a 2 years high in Nov '15, and has been consolidating sideways with a slight downward bias since then. It is trading above its three EMAs in a bull market.

BSE FMCG Index

A perennial market favourite, BSE FMCG fell victim to a down trend after touching a 2 years high in Feb '15. Two poor monsoons in a row played spoilsport for the sector. Early forecasts of this year's monsoon have indicated a rain surplus. The index has duly breached its down trend line, but it hasn't been a convincing breach yet.

BSE Healthcare Index

BSE Healthcare was in a bull market till Oct '15 when it formed a 'triple top' reversal pattern and entered a down trend. The index is trading below its down trend line and its 200 day EMA in bear territory. FDA strictures against several well-known pharma companies has put a question mark on future growth of the export market. Domestic market has also been affected by price control and government regulation against combined dosages.

BSE IT Index

BSE IT touched a 2 years high in Mar '15 and entered a sideways consolidation within a large 'pennant' pattern. Despite Rupee devaluation, IT companies have not benefitted much due to slow growth in Europe and visa strictures in USA. Market leaders should be able to overcome these near-term issues. Avoid the mid-cap and small-cap companies.

BSE Metal Index

BSE Metal has been a victim of the commodity down cycle - correcting more than 50% from its Jun '14 top. The index is facing resistance from its 200 day EMA. Contrarian investors can pick market leaders, but need to remain patient.

BSE Oil & Gas Index

BSE Oil & Gas has been correcting since touching a 2 years high in Jun '14. Despite lower prices in the international market, higher duties locally and price control have proved detrimental to profitability. The index is trading in bull territory above its three EMAs but remains in a down trend.

BSE Power Index

BSE Power is a sector investors should not touch with a 10 ft. pole. Too much government interference, rampant power theft and poor performance of state electricity boards have turned this sector into a basket case.

BSE Realty Index

BSE Realty is a clear avoid for investors. The index is in a 2 years long down trend and may not be able to reverse the trend anytime soon. However, there may be no better time like now to invest in an apartment or house for personal use. 

Stock Chart Pattern - Indian Hotel (An Update)

Fundamentally, the company is still struggling to come out of the woods. Mistimed acquisitions - overseas and in India - at the height of the previous bull market had left the company with a huge debt burden.

A global economic downturn followed by the terrorist attack in Mumbai severely curtailed visits by foreign tourists, and put paid to any near term chance of a revival. Overcapacity in the Indian market didn't help matters.

The lower-end Ginger brand hasn't been successful. A change at the helm and efforts to restructure and consolidate operations seem to be slowly bearing fruit.

Technically, the daily bar chart pattern of Indian Hotel shows that the worst may be getting over. The stock had touched a low of 37.55 on Aug 6 '13. The subsequent rally took the stock to a high of 127.25 on Dec 5 '14 - a huge gain of 240% in 16 months.

The stock touched slightly lower tops of 126.85 on Jan 2 '15 and 126.95 on Feb 5 '15 - forming a 'triple top' reversal pattern in the process. A 7 months long correction ensued, and the stock slid below its three EMAs into bear territory.

The stock price touched a low of 80.75 on Sep 7 '15 - testing the long-term support-resistance level of 80 - and retracing 51% of its entire rise from the low of Aug '13 to the high of Dec '14. Since a 50% Fibonacci retracement often marks the end of a bear phase, it was no surprise that the stock has been on an up trend for the past three months.

By convincingly crossing above its three EMAs with a volume surge on Dec 2 '15, the stock has re-entered bull territory. The 'golden cross' of the 50 day EMA above the 200 day EMA has technically confirmed a bull market.

Three of the four daily technical indicators - MACD, RSI, Slow stochastic - are looking overbought. ROC has corrected sharply from its overbought zone. The stock is undergoing a sideways consolidation - after which it may move up to touch a new high.

This may be a good time to start accumulating the stock.

BSE Sectoral Indices – which ones will lead the next leg of the bull market?

Sensex has undergone a bull market correction after touching a lifetime high in Sep ‘14. FII selling was the main trigger. With BJP likely to form a government in Maharashtra and Haryana, sentiments have turned positive again.

Except BSE Metals and BSE Realty indices, all the other 9 indices are trading above their rising 200 day EMAs in bull markets. Does that make Metals and Realty contrarian plays? The answer is: Yes, for metals; but No, for realty.

What about sectoral leaders for the next leg of the bull market? From the charts, Capital Goods, Oil & Gas and Metals seem to have the best potential. Needless to say, one needs to be stock-specific within each sector.

BSE Auto Index

Passenger vehicle sales slipped in Sep ‘14 but commercial vehicles are showing an up tick – which is a sign of an improving economy. After touching a high in Sep ‘14 with the Sensex, BSE Auto index underwent a bull market correction. The up move has resumed. With inflation moderating, interest rates are likely to come down in the not-too-distant future. This is a ‘buy on dips’ sector.

BSE Bankex

BSE Bankex underwent a sideways consolidation before firmly entering a bull market in Mar ‘14. The index is undergoing another sideways consolidation with an upward bias since May ‘14, and touched a new high during the week. PSU banks may appear to be contrarian plays, but they are still struggling with NPAs. Credit growth is still tepid, but should start picking up in 2015.

BSE Capital Goods Index

After forming a ‘double top’ reversal pattern during Jun-Jul ‘14, BSE Capital Goods index twice corrected down below its 20 day and 50 day EMAs, but did not test its rising 200 day EMA. Economic growth is expected to rise during 2015-16, and interest rates are likely to come down. That should boost the prospects of the sector.

BSE Consumer Durables Index

BSE Consumer Durables index entered a bull market at the end of Mar ‘14 after spending more than 9 months in bear territory. The index formed a small ‘double top’ reversal pattern during Sep-Oct ‘14 and corrected briefly below its 20 day and 50 day EMAs before bouncing back into bull territory. Consumer sentiments are definitely improving – if Dhanteras/Diwali sales are any indication. The index should touch new highs soon.

BSE FMCG Index

BSE FMCG index was one of the leaders till Jul ‘13. A year-long sideways consolidation ended with the index touching a new high in Sep ‘14. A sharp bull market correction ensued, and dropped the index below its 20 day and 50 day EMAs. Don’t expect any fireworks from the sector as rural demand is on a down-swing.

BSE Healthcare Index

With a rising population and increasing per capita income, BSE Healthcare index continues in a strong bull market. More stringent inspection by US FDA authorities may curb export prospects of domestic generic manufacturers. MNC pharma stocks should continue to do well.

BSE IT Index

It has been a bit of a roller-coaster ride for BSE IT index. Export growth is sensitive to forex fluctuations and economic growth (or lack of it) in the western world. Despite recent correction, the index is in a bull market. Stick to the large-cap counters.

BSE Metal Index

A sharp rally after election result euphoria took the BSE Metal index to a new high in Jun ‘14. It has been a steady descent into bear territory since then, as reality hasn’t lived up to expectations of infrastructure growth. It may take another couple of quarters for infrastructure projects to resume in earnest. That means the time to buy is now.

BSE Oil & Gas Index

BSE Oil & Gas index went nowhere till it bounced up into bull territory in Mar ‘14. The index has managed to remain in bull territory despite a long sideways consolidation with a downward bias after touching a high in Jun ‘14. Deregulation of petrol and diesel prices should benefit OMCs. Low oil price in international market should benefit refineries.

BSE Power Index

A ‘triple top’ reversal pattern ended a sharp rally during May ‘14. BSE Power index has drifted down to test support from its 200 day EMA. So far, the support has held. The sector is overly dependent on government policies. There is uncertainty about coal availability. When in doubt, stay out.

BSE Realty Index

A sharp rally into bull territory after a long bear market ended with the high touched in Jun ‘14. Note the negative divergences on ROC and RSI charts (which failed to touch new highs) and a ‘double top’ reversal pattern on Slow stochastic chart. BSE Realty index started a correction that has returned it back where it belongs – in bear country. Avoid.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jan 11, ‘13

S&P 500 Index Chart

The 6 months daily bar chart pattern of the S&P 500 index has recovered all its losses from the Nov ‘12 low following the triple-top reversal pattern. The index is poised near its Sep ‘12 top, and should move up to touch a new 52 week high.

All three EMAs are rising and the index is trading above them. The bulls are back in control. But volumes are drifting down as the index is moving up. That is a concern. Also, the gaps between the EMAs are widening – which is a sign that the index is becoming overbought.

Daily technical indicators are bullish. MACD is positive and rising above its signal line. RSI is moving sideways below its overbought zone. Slow stochastic is inside its overbought zone.

A bit of correction or consolidation will improve the technical health of the chart, and enable bulls to make an attempt at testing the all-time high touched back in Oct ‘07.

FTSE 100 Index Chart

The 6 months bar chart pattern of the FTSE 100 index consolidated for a couple of days before moving up to cross the 6100 level. In doing so, it crossed above the triple-top reversal pattern formed during Feb-Jul ‘11 (not shown in chart) and touched a 3 year high.

All three EMAs are rising and the index is trading above them. However, this isn’t a time of euphoria, but of caution. The index is trading more than 300 points above its 200 day EMA, which is a sign of an overbought condition.

Daily technical indicators are bullish, but looking overbought. MACD is positive and rising above its signal line, but has entered overbought territory. RSI has re-entered its overbought zone, where it doesn’t like to stay for long. Slow stochastic is well inside its overbought zone.

Some correction/consolidation is likely, which will help the index to attempt a test of its 2007 high.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 indices have overcome resistance zones, and look all set to move up to test their 2007 highs. However, the up moves may be preceded by some correction/consolidation. Hold, with suitable trailing stop-losses.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jan 04, ‘13

S&P 500 Index Chart

The last-minute resolution of the ‘fiscal cliff’ provided renewed energy to the bulls. The one year bar chart pattern of the S&P 500 index jumped above the resistance zone between 1420 and 1440, backed by good volumes. That provided technical validity to the upward break out.

The index is hesitating near the ‘triple top’ reversal pattern formed during Sep-Oct ‘12. This is quite expected, as traders tend to remember levels from which a stock or index had reacted earlier. That is why support and resistance levels are important in technical analysis.

Since the index is in a bull market – note that it is trading above all three EMAs, which are rising – the previous top touched in Sep ‘12 should not halt the upward march. The all-time high touched in Oct ‘07 is likely to be tested and breached.

Daily technical indicators are looking quite bullish. MACD is rising above its signal line in positive territory. RSI is consolidating half-way between its 50% level and the edge of its overbought zone. Slow stochastic has entered its overbought zone.

Hold, with a trailing stop-loss. It is not a good idea to buy when the index is less than 10% below its all-time high.

FTSE 100 Index Chart

The resolution of the ‘fiscal cliff’ in the US helped the one year bar chart pattern of FTSE 100 index to reverse its corrective move and cross above the resistance zone between 5950 and 6000. The index moved up to touch a 52 week high close to the 6100 level, which also happens to be near the level of the ‘triple-top’ reversal pattern formed during Feb-Jul ‘11.

It is likely that the index may consolidate or even correct a bit here before it can move above the 6100 level. Daily technical indicators are looking bullish but overbought. MACD has crossed above its signal line in positive territory, and about to enter its overbought zone. RSI has entered its overbought zone. Slow stochastic has risen sharply and is well inside its overbought zone.

The index is in a bull market, but close to a previous reversal level. Hold, with a trailing stop-loss.

Bottomline? One year daily bar chart patterns of S&P 500 and FTSE 100 indices have overcome resistance zones – thanks to the resolution of the US ‘fiscal cliff’. Both indices are near the levels of previous ‘triple top’ reversal patterns. Some consolidation or correction may precede the next up moves.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Dec 31, ‘12

S&P 500 Index Chart

2012 turned out to be a good year for the S&P 500 index, despite the painfully slow growth of the US economy. The index touched a 3 years intra-day high of 1475 in Sep ‘12 before forming a triple-top reversal pattern and going into a corrective mode.

In the previous post on the daily bar chart pattern of S&P 500 index, the resistance zone between 1420 and 1440 had proved a tough hurdle for bulls. The index dropped below the 1400 level before bouncing back inside the resistance zone on hopes of a resolution of the ‘fiscal cliff’ issues.

Daily technical indicators are giving mixed signals. MACD is positive, but has crossed below its signal line. RSI slipped below its 50% level, but has crept back up. Slow stochastic has fallen sharply below its 50% level.

The index may continue to consolidate near the resistance zone between 1420 and 1440 till the issues related to the ‘fiscal cliff’ are satisfactorily resolved.

FTSE 100 Index Chart

2012 was a volatile year for the FTSE 100 index, thanks to a double-dip recession in the UK economy followed by an almost imperceptible recovery. The index dropped sharply below its 200 day EMA in May ‘12, before gradually recovering all its losses during the rest of the year.

For the past couple of weeks, the 1 year daily bar chart pattern of the FTSE 100 index has been struggling to cross the resistance zone between 5950 and 6000 – but without much luck. The index had corrected sharply after forming a triple-top reversal pattern during the first half of 2011 and haven’t yet recouped all its losses.

Daily technical indicators are looking bearish, which means the correction from the 6000 level is not quite over. MACD is positive, but has crossed below its signal line. RSI has dropped to its 50% level. Slow stochastic formed a head-and-shoulders like reversal pattern inside its overbought zone before plummeting below its 50% level.

A drop below the 50 day EMA and a test of support from the rising 200 day EMA is a possibility.

Bottomline? One year daily bar chart patterns of S&P 500 and FTSE 100 indices are struggling to overcome resistance zones. Some consolidation/correction can be expected before resistance zones are crossed. Both indices are in bull markets. Hold, or use dips to add.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Dec 07, ‘12

S&P 500 Index Chart

Not much has changed from a week ago on the 6 months bar chart pattern of S&P 500 index. On Mon. Dec 3 ‘12, the index briefly entered the resistance zone between 1420 and 1440, but retreated to close lower. After dropping below the 50 day and 20 day EMAs during the next 2 days, the index recovered to close above all three EMAs and marginally higher for the week.

The 20 day EMA is moving up towards the flat 50 day EMA. The 200 day EMA has resumed its up move. The long-term bull market is intact – despite the correction from a triple-top.

Daily technical indicators are bullish. MACD is rising above its signal line and entered positive territory. RSI bounced up again from its 50% level. Slow stochastic bounced up from the edge of its overbought zone.

The index is likely to make another attempt to cross the resistance zone between 1420 and 1440. The drop in unemployment percentage may enthuse the bulls. Bears may not give up ground easily.

FTSE 100 Index Chart

The 6 months bar chart pattern of FTSE 100 index closed above the 5900 level for the first time since Oct ‘12, and moved higher than its Nov ‘12 top. The 20 day EMA has crossed above the 50 day EMA, and all three EMAs are moving up with the index above them. The bull market correction from a triple-top pattern is over.

Daily technical indicators are bullish, but looking overbought. MACD is rising above its signal line in positive territory. RSI is inside its overbought zone, where it doesn’t like to remain for long. Slow stochastic is well inside its overbought zone.

The index is just below a long-term resistance zone between 5950 and 6000. Expect a bit of correction or consolidation before the resistance zone can be overcome.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 indices are consolidating below resistance zones. Both indices have recovered after undergoing bull market corrections from triple-top reversal patterns. Hold on to current positions. Add more after the indices cross their resistance zones.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Nov 30, ‘12

S&P 500 Index Chart

Falling volumes in last week’s analysis of the 6 months daily bar chart pattern of S&P 500 index had raised questions about the sustainability of the rally, unless the bulls were able to generate enough follow-up buying.

The Thanksgiving break seems to have re-energised the bulls. After struggling to cross the 50 day EMA for the first three days of trading last week, the index broke out above on good volumes. However, the zone between 1420 and 1440 is a resistance zone where the bears may put up a fight.

Technical indicators are looking bullish. MACD is rising swiftly above its signal line, but remains negative. RSI has bounced up from its 50% level, and moving sideways. Slow stochastic has risen sharply to enter its overbought zone.

The 20 day EMA is moving up towards the 50 day EMA. Bulls will regain control if the index crosses above 1440.

FTSE 100 Index Chart

The 6 months daily bar chart pattern of FTSE 100 index struggled to cross the 5800 level during the first three days of the week. But the bears were overwhelmed as the index rose to touch the 5900 level by the end of last week – regaining almost all its losses during the month.

Daily technical indicators are suggesting the rally isn’t over. MACD has entered positive territory above its rising signal line. RSI has crossed above its 50% level. Slow stochastic is about to enter its overbought zone.

The 20 day EMA has moved up to touch the 50 day EMA. The zone between 5950 and 6000 is a long-term resistance zone where the bears are expected to put up a fight. Bulls will regain complete control on a cross above 6000.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 indices have rallied smartly after correcting from triple-top reversal patterns. Bulls need to cross strong resistance zones before they can regain control. No fresh buying is advised, but hold on to current positions.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Nov 16, ‘12

S&P 500 Index Chart

Bears have tightened their grip on the daily bar chart pattern of S&P 500 index. Four days in a row, the 200 day EMA provided good support to the falling index. But on Wed. Nov 14 ‘12, heavy selling pushed the index 20 points (1.5%) below its 200 day EMA, and also below the stop-loss level of 1360.

By the end of the week, the index pulled back to the 1360 level. Technically, the breach of the 200 day EMA will be confirmed if the index closes below 1335 (applying the 3% ‘whipsaw’ rule). Note how the index ‘whipsawed’ twice in May and Jun ‘12 after dropping below the 200 day EMA.

However, the uncertainty about the ‘fiscal cliff’, plus the Eurozone recession calls for caution. If you didn’t sell when the 200 day EMA and the 1360 level got breached, you can sell on a likely pullback towards the 200 day EMA. Let the correction play out. Re-enter on a convincing move above the 200 day EMA.

Technical indicators are bearish, and looking oversold. MACD is below its signal line and falling deeper into negative territory. RSI is trying to emerge from its oversold zone. Slow stochastic is well inside its oversold zone. An upward bounce towards the 200 day EMA is possible.

Keep a close watch on the support level of 1270 from where the index had bounced up in Jun ‘12. A drop below 1270 may end the bull market.

FTSE 100 Index Chart

The one year daily bar chart pattern of FTSE 100 index received token support from its 200 day EMA before dropping like a stone below the long-term moving average and the stop-loss level of 5625.

The breach of the 200 day EMA will be confirmed only on a close below 5550 (applying the 3% ‘whipsaw’ rule), which coincidentally happens to be the downward target of the triple-top reversal pattern that formed a week ago.

Technical indicators are looking bearish, and a bit oversold. MACD is falling below its signal line in negative territory. RSI has dropped to the edge of its oversold zone. Slow stochastic is deep inside its oversold zone. Any upward bounce towards the 200 day EMA is likely to be used by the bears to sell.

Bottomline? Chart patterns of S&P 500 and FTSE 100 indices have breached supports from their respective 200 day EMAs after sharp corrections following ‘triple top’ reversal patterns. Bears are tightening their grips. Let the correction play out, and keep a close watch on the Jun ‘12 lows.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Nov 9, ‘12

S&P 500 Index Chart

The bull market in the 6 months bar chart pattern of S&P 500 index is looking shaky. The US president’s re-election was supposed to strengthen the hands of the bulls by removing the uncertainty of who the next president would be. Instead, the uncertainty about the ‘fiscal cliff’ is suddenly looming large.

The index had already formed a ‘triple top’ reversal pattern – some would say that it is an example of the stock market discounting bad news in advance. The downward target of 1400 was breached in a high-volume fall. The index dropped lower to test support from the 200 day EMA before bouncing up briefly.

The good news is that the support from the long-term moving average held. The bad news is that the 20 day EMA has crossed below the 50 day EMA, and the 50 day EMA has formed a bearish ‘rounding top’ pattern. Volumes are also showing bear domination, with down-day volumes exceeding up-day volumes. Hold with a stop-loss at 1360.

Technical indicators are looking quite bearish. MACD is below its falling signal line, and falling deeper into negative territory. RSI has bounced up weakly from the edge of its oversold zone. Slow stochastic has fallen back inside its oversold zone. Any upward bounce is likely to be used by the bears to sell.

Economic recovery continues to be slow and labourious. Initial unemployment claims dropped some more – but it could be partly due to ‘Sandy’, which prevented people from going out to file claims. Consumer sentiment is up a bit. But ECRI’s WLI (Weekly Leading Index) has fallen. If Obama fails to negotiate the ‘fiscal cliff’, a recession is likely in 2013.

FTSE 100 Index Chart

The 6 months bar chart pattern of FTSE 100 reminds me of one of the numerous quotes attributed to Yogi Berra, former player and manager of the NY Yankees: “It’s deja vu all over again.” The index has formed a ‘triple top’ reversal pattern, and dropped to its 200 day EMA before bouncing up.

The downward target of the ‘triple top’ is 5550. If the index falls there, it may be ‘game over’ for the bulls. Technical indicators are looking bearish. MACD is below its signal line, and has slipped into negative territory. RSI fallen below its 50% level. Slow stochastic has dropped to the edge of its oversold zone.

Note that MACD and RSI touched progressively lower tops while the FTSE was forming its ‘triple top’. The negative divergences may cause a deeper correction. Any upward bounce may induce bear selling. Hold with a stop-loss at 5625.

A GDP growth of 1% in Q3 meant that UK’s economy had emerged from a double-dip recession. However, poor retail sales and slowdown in the services sector have raised the spectre of a triple-dip recession.

Bottomline? Chart patterns of S&P 500 and FTSE 100 indices are seeking support from their respective 200 day EMAs after sharp corrections following ‘triple top’ reversal patterns. Bull rallies will be under threat if the supports are breached. Hold with strict stop-losses.