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Monday, May 6, 2013

Stock Index Chart Patterns: S&P 500 and FTSE 100 – May 03, ‘13

S&P 500 Index Chart

S&P 500_May0313

The 6 months daily bar chart pattern of S&P 500 index tested its Apr ‘11 intra-day top of 1597 three days in a row, before climbing to an all-time high of 1618 on Fri. May 3 ‘13. The weekly close at 1614 was also an all-time closing high.

All three EMAs are rising and the index is trading well above them. The last of the bears have been vanquished. The index is in ‘blue sky’ territory with no resistances. The bulls are in complete control, and ready to crack open the bubbly.

But there are a few technical signals that warrant caution, and not celebration. The volume bars on up-days have not been great, and there was no strong volume support during Friday’s all-time high. All three daily technical indicators failed to touch new highs with the index.

The index and its 50 day EMA are moving far away from the 200 day EMA – a situation that is not sustainable for long. Enjoy the ride, use dips to add, and maintain a trailing stop-loss to protect profits.

ISM manufacturing report was a bit better than expected. Unemployment claims fell. Non-farm payrolls grew. No wonder bulls were charging ahead.

FTSE 100 Index Chart

FTSE_May0313

The following comments were made in last week’s analysis of the 6 months daily bar chart pattern of the FTSE 100 index: “The down trend that started after the Mar ‘13 double-top at 6534 is still in progress. But it looks like a mild bull market correction.”

After consolidating sideways within a range during the first four days of the week, the index rose above its Mar ‘13 double-top to touch a new 52 week (and 4 yr) intra-day high of 6542. All three EMAs are rising and the index is trading above them. The bulls are back on top.

But there are some warning signs. Last Tuesday’s (Apr 30 ‘13) volumes were highest during the week – on a down-day. All three daily technical indicators are bullish, but showing negative divergences by failing to touch new highs with the index.

Stay invested, but maintain a trailing stop-loss.

Bottomline? Bulls are ruling the daily bar chart patterns of S&P 500 and FTSE 100 indices. Hold on to current positions, and use dips to add.

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