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Monday, November 10, 2014

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Nov 07, ‘14

S&P 500 Index Chart

SPX_Nov0714

The following comments appeared in last week’s analysis of the daily bar chart pattern of S&P 500: “More worrisome is the large ‘broadening top’ reversal pattern that appears to be forming since the index touched its Jul 24 top of 1991.”

The index touched new intra-day (2034) and closing (2032) highs, and gained 14 odd points for the week – but remains within the ‘broadening top’ pattern (marked by blue lines). Though the index is trading above all three EMAs in a bull market, a failure to move above the upper blue resistance line may lead to a crash below the lower blue support line.

Technical indicators are looking overbought. MACD and Slow stochastic are well inside their respective overbought zones. RSI is just below its overbought zone, but showing negative divergence by failing to rise higher with the index. Caution is advised. One needs to respect a reversal pattern till it gets negated.

On longer term weekly chart (not shown), the index is trading above all three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones but showing negative divergences by failing to touch new highs with the index. The bearish ‘broadening top’ pattern is casting a dark shadow over the bull market.

FTSE 100 Index Chart

FTSE_Nov0714

The daily bar chart pattern of FTSE 100 consolidated between its 20 day and 50 day EMAs during the first three trading days of the week before gathering strength to cross above the 50 day EMA and briefly above the 6600 level, before closing with a small gain of 20 odd points for the week.

Daily technical indicators are looking bullish. MACD is rising above its signal line and is poised to enter positive zone. RSI is moving up towards its overbought zone. Slow stochastic has entered its overbought zone.

The index needs to gain another 50 points to cross above its falling 200 day EMA and re-enter bull territory. Bears may not give up without a fight.

On longer term weekly chart (not shown), the index has moved almost 400 points above its rising 200 week EMA but is facing resistance from its entangled 20 week and 50 week EMAs. Weekly technical indicators have corrected oversold conditions. MACD and RSI are still in bearish zones. Slow stochastic has just crossed above its 50% level. The long-term bull market may have survived a strong bear attack.

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