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Monday, August 7, 2017

S&P 500 and FTSE 100 charts (Aug 04 '17): consolidating before the next leg of the rally

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 was in pause mode after touching a new high on Jul 27. The index consolidated sideways above the 'support zone' (refer last week's post) and its three rising EMAs during the week.

The index gained barely 5 points on a weekly closing basis, and formed a 'doji' candlestick pattern on Fri. Aug 4 that can sometimes trigger a corrective move.

Daily technical indicators have corrected overbought conditions, but remain in bullish zones. MACD has crossed below its signal line, which is a 'sell' signal. (Note the three previous occasions in Mar, May & Jun '17). RSI is moving sideways with slight downward bias. Slow stochastic is showing downward momentum.

Bulls are buying every dip - so expect the index to resume its up move soon. However, strong volumes on down days indicate that bears continue to remain active. Some more consolidation or correction will improve the technical 'health' of the chart. 

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are inside their respective overbought zones.

FTSE 100 index chart pattern


The (purple) down trend line that had been dominating the daily bar chart pattern of FTSE 100 for the past two months was finally breached last week.

Bears tried their best to contain bulls as the index consolidated sideways above the 'support-resistance' level of 7385 during the first three days of trading. 

On Thu. Aug 3, the index bounced up and just managed to close above the down trend line. The index continued to rally on Fri. Aug 4, and closed above the 7500 level after 7 weeks - gaining nearly 2% on a weekly closing basis.

The breakout above the down trend line was not accompanied by any significant increase in volumes (not shown). That can lead to a pullback towards the down trend line before the index can rise to a new high.

Daily technical indicators are showing upward momentum in bullish zones. The rally can extend a bit further. All three EMAs are rising, and the index is trading above them in a bull market. That means dips can be used to buy.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones and showing some upward momentum.

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