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Monday, August 11, 2014

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Aug 08, ‘14

S&P 500 Index Chart

S&P 500_Aug0814

In last week’s analysis of the 6 months daily bar chart pattern of S&P 500, bearish technical indicators had led to the following remarks: “Some more correction can’t be ruled out. Expect stronger support from the 1850-1900 zone.”

The index fell to an intra-day low of 1905 on Thu. Aug 7 ‘14 – just above the support zone – before bouncing up on the last day of the week to close above the 1930 level. Is the correction over? Technically, not yet. The index needs to move convincingly above 1960 to reverse the down trend that started from the Jul 24 top of 1991.

Technical indicators are in bearish zones, but showing some signs of turning around. MACD is inside its oversold zone, but has stopped falling. RSI has bounced up from the edge of its oversold zone, but is still below its 50% level. Slow stochastic is inside its oversold zone, but trying to move up.

However, all three indicators are showing negative divergences by touching lower bottoms than the ones touched in Apr ‘14, while the index has touched a much higher bottom. That is an indication that bears may not give up so easily.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA during the week, but is trading above all three weekly EMAs in a long-term bull market. Weekly technical indicators have corrected overbought conditions, but remain in bullish zones. Any further correction should receive support from the 1850-1900 zone.

FTSE 100 Index Chart

FTSE_Aug0814

The 6 months daily bar chart pattern of FTSE 100 shows strong bear domination. After desperately trying to hold on to its 200 day EMA during the first 2 days of the week, the index collapsed below the 6550 level to an intra-day low of 6529 on Fri. Aug 8 ‘14. (The possibility of a drop to the 6500 level was mentioned in last week’s post.)

Daily technical indicators are looking bearish and a bit oversold. MACD is falling sharply towards its oversold zone. RSI is sliding down towards its oversold zone. Slow stochastic has already entered its oversold zone. An upward bounce can occur at any time. Bears will probably use the opportunity to sell.

On longer term weekly chart (not shown), the index has closed below its 50 week EMA for the first time in more than a year. However, it is trading well above its rising 200 week EMA in a long-term bull market. Weekly technical indicators are looking bearish, but not oversold. Some more correction can’t be ruled out.

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