Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Apr 2, '10

FTSE 100 index chart

In last week's analysis of the FTSE 100 index chart pattern, I had mentioned that it seemed game over for the bears, but they had a glimmer of hope for a fight back as long as the FTSE did not cross the 5768 level.

There was no correction - just some sideways consolidation in a holiday-shortened week. The FTSE struggled a bit to stay above the 5700 level, but it didn't fall below the Jan '10 top of 5600 either - keeping the possibility of a bearish head-and-shoulders pattern formation at bay.

The index ended the week with a new high and close of 5745. A fifth straight week of higher close on a week-on-week basis. All three EMAs are moving up with the index above them. Keep your eyes on the distance between the 50 day and 200 day EMA, which is approaching 400 points. There was a 10% correction in Jan '10 when the 50 day EMA moved too far above the 200 day EMA.

The MACD is positive but has slipped a little and is touching the signal line. The RSI is showing negative divergence, as it fell from the overbought region before bouncing off the 50% level. The MFI is above the 50% level but moving sideways. The slow stochastic dropped from the overbought zone, but is trying to get back up again.

DAX index chart

There seems to be no hesitancy in the onward and upward march of the bulls at the German DAX index chart. The index sailed past the 6200 level, made a new high at 6239 and closed more than 100 points higher on a weekly basis.

The technical indicators are looking more bullish than those of the FTSE. All three EMAs are rising with the index above them. The gap between the 50 day and 200 day EMAs is not as wide as to cause concern. But the index has moved quite a distance above the 20 day EMA, which could cause a slight correction.

The MACD is positive and above the signal line. The RSI is showing negative divergence, as it dipped below the overbought zone and failed to make a new high. The MFI is above the 50% level. The slow stochastic is well inside the overbought zone, where it has remained for the past four weeks.

CAC 40 index chart

A slightly more circumspect set of bulls are ruling the French CAC 40 chart pattern. The index has so far failed to move above the Jan '10 high of 4088. But it did manage to close above the 4000 level by the end of the holiday-shortened week. This was the first close above the 4000 level since the middle of Jan '10.

All three EMAs are moving up with the index above them. The MACD is positive and just above the signal line. The RSI is showing negative divergence - drifting down towards the 50% level after briefly entering the overbought zone. The MFI is below the 50% level but trying to move up. The slow stochastic dropped below the overbought zone but has re-entered it.

Bottomline? The chart patterns of the European indices are looking a little overbought. The negative divergences in the RSI continues to be a source of concern. Stay invested with tight stop-losses and be very selective in buying.