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Monday, August 21, 2017

S&P 500 and FTSE 100 charts (Aug 18 '17): bears trying to wrest control

S&P 500 index chart pattern


The following remarks appeared in the previous post on the daily bar chart pattern of S&P 500:

"On Fri. Aug 11, the index formed a 'doji' candlestick, which indicates indecision among bulls and bears that can potentially lead to a technical bounce towards the 'support/resistance zone'.
Some more correction or consolidation is possible. RSI and Slow stochastic are showing negative divergences by falling lower than their Jul '17 lows." 

On Mon. Aug 14, the index formed an upward 'gap' and bounced up above the 'support/resistance zone' (between 2450 & 2460) and the 20 day EMA. After touching a lower top of 2475, the index formed another 'doji' candlestick on Wed. Aug 16.

A sharp sell-off followed on Thu. Aug 17 and Fri. Aug 18. The index dropped below the 'support/resistance zone' and its 20 day and 50 day EMAs for the second week in a row.

In the process, the index closed the two upward 'gaps' - formed on Aug 14 and an earlier one (marked on chart) on Jul 12. Since the index is trading well above its rising 200 day EMA in a bull market, closure of an upward 'gap' should be followed by a resumption of the up move.

However, by touching a lower top on Aug 16 and then falling to a low of 2421 on Aug 18, the index has confirmed a down trend, and formed a bearish pattern of 'lower tops, lower bottoms'. 

Daily technical indicators are bearish and showing downward momentum. RSI and Slow stochastic are showing positive divergences by not falling lower with the index. Friday's trading has formed another 'doji' candlestick. 

A technical bounce towards the 'support/resistance zone' is likely. Expect bears to use such a bounce to sell. A fall to the 2390-2400 zone is possible. 

On longer term weekly chart (not shown), the index received support from its 20 week EMA, and closed well above its rising 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing downward momentum.

FTSE 100 index chart pattern


The following comment appeared in last week's post on the daily bar chart pattern of FTSE 100: "Expect some short covering by bears, which can lead to a technical bounce."

As expected, there was a technical bounce that led to a close above the 20 day and 50 day EMAs on Wed. Aug 16. However, the resistance from the (purple) down trend line - which has dominated the chart since Jun '17 - proved too strong.

The index dropped to seek support from the 7300 level for the second week in a row, but managed to eke out a 19 points gain on a weekly closing basis.

Daily technical indicators are bearish and showing downward momentum. The entire trading during the past three months or so have occurred within a bearish 'descending triangle' pattern - barring a 'false' breakout in early-Aug '17.

A fall below 7300 and the rising 200 day EMA appears on the cards.

On longer term weekly chart (not shown), the index closed below its 20 week EMA for the second week in a row but is trading above its rising 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are looking bearish. Slow stochastic has dropped well inside its oversold zone, and can trigger a technical bounce.

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