Monday, March 27, 2017

S&P 500 and FTSE 100 charts (Mar 24 '17): retracing last 4 months rally?

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 shows that good sense is dawning among bulls. The 'Trump rally' has not only come to a halt, but may have started retracement of the entire 320 points rally from the Nov 4 '16 low of 2084.

A 38.2% Fibonacci retracement may take the index down to 2280. A 50% Fibonacci retracement can take the index down to 2240.

The index had a sharp break down below the small 'symmetrical triangle' pattern within which it was consolidating after touching its lifetime high of 2401 on Mar 1.

The 50 day EMA has provided good support so far. But that support is unlikely to hold. Failure to pass the healthcare bill has raised market concerns that Trump may not be able to deliver on many of his other election campaign promises.

There is a technical reason why the index may breach support from its 50 day EMA. Note that all three technical indicators are showing negative divergences by falling lower than their Feb '17 lows, while the index touched a higher bottom.

Technical indicators are looking bearish and hinting at some more correction. But the index is trading well above its rising 200 day EMA. The long-term bull market is intact.

On longer term weekly chart (not shown), the index closed below 2350 but well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are correcting overbought conditions, and showing downward momentum. Expect some more correction.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 had been trading within a large 'rising wedge' pattern for the past two months. The index managed to cling on to the lower edge of the 'wedge' last week.

However, at the time of writing this post, the index has fallen sharply below the 'wedge'. (The possibility of such a downward break out was mentioned in last week's post.)

Daily technical indicators are looking bearish and showing downward momentum. Some more correction is likely.

On longer term weekly chart (not shown), the index closed 1.2% lower for the week but well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are correcting overbought conditions, and showing downward momentum.

No comments: