Amazon deals

Monday, January 5, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jan 02, 2015

S&P 500 Index Chart

SPX_Jan0215

Volumes were low on another truncated trading week due to the New Year holiday. The daily bar chart pattern of S&P 500 rose to touch new intra-day and closing highs on Mon. Dec 29, ‘14 – but failed to test the upper resistance line.

Negative divergences on all three technical indicators – which failed to touch new highs with the index – encouraged bears. A sharp correction dropped the index below its 20 day EMA. The possibility was mentioned in last week’s analysis.

The bearish ‘broadening top’ pattern in last week’s chart has been discarded. It has been replaced with another bearish ‘rising wedge’ pattern. Why? Because the trading pattern since the Oct ‘14 low is suggesting a ‘wedge’ rather than a ‘broadening top’.

Failure of the index to test the upper resistance line of the ‘wedge’, followed by the correction below the 20 day EMA may lead to a downward breach of the lower support line of the ‘wedge’ (which is currently at 2010).

Daily technical indicators are looking bearish. MACD has dropped to touch its signal line in positive zone. RSI is seeking support from its 50% level. Slow stochastic has dropped from its overbought zone. The index is trading above its 50 day and 200 day EMAs in a long-term bull market, but a large reversal pattern formed at a market top is an alarm bell for bulls.

On longer term weekly chart (not shown), the index is trading above its three weekly EMAs in a long-term bull market, but has formed a ‘reversal week’ pattern (higher high, lower close). All three weekly technical indicators are showing negative divergences by failing to touch new highs with the index. It may be a good idea to book part profits, and hold the rest with a stop-loss at 2010.

FTSE 100 Index Chart

FTSE_Jan0215

The daily bar chart pattern of FTSE 100 crossed above its 200 day EMA and the 6650 level in bull territory on Mon. Dec 29 ‘14. But the rally was unconvincing. Bears pounced almost immediately, and dropped the index down below its three EMAs.

Daily technical indicators are showing some bullish signs. MACD is above its rising signal line in negative zone. RSI is moving sideways along its 50% level. Slow stochastic is above its 50% level, and rising gradually.

Failure of the index to sustain above its 200 day EMA will encourage bears. At the time of writing this post, the index is trying to hang on to the 6500 level.

On longer term weekly chart (not shown), the index is trading well above its 200 week EMA in a long-term bull market, but has dropped below its 20 week and 50 week EMAs. Weekly technical indicators are giving mixed signals. MACD and RSI are looking bearish, but Slow stochastic is in bullish zone. Since touching a high of 6905 on Sep 4 ‘14, the index has been consolidating sideways within a large symmetrical triangle pattern.

No comments: