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Monday, August 28, 2017

S&P 500 and FTSE 100 charts (Aug 25 '17): bears tighten their grips

S&P 500 index chart pattern


The following comments from last week's post on the daily bar chart pattern of S&P 500 are worth noting: 

"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."

On Mon. Aug 21, the index touched an intra-day low of 2417 but bounced up to close just below the 'GAP' formed on Jul 12 (see chart) - forming a 'reversal day' bar (lower low, higher close).

The next day, the index rose above its 50 day EMA but faced strong resistance from the falling 20 day EMA inside the 'Support/Resistance zone' between 2450 & 2460. During Wed. & Thu. (Aug 23 & 24), the index traded between the 'Support/Resistance zone' and the Jul 12 'GAP'.

On Fri. Aug 25, the index crossed above its falling 20 day EMA intra-day but faced twin resistances from the (purple) down trend line and the 'Support/Resistance zone'. It closed below its 20 day and 50 day EMAs, but gained 17 points (0.7%) on a weekly closing basis.

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

The index is trading well above its rising 200 day EMA in a longer-term bull market. However in the near-term, the index is in a down trend since touching a lifetime high of 2491 on Aug 8, and has formed a bearish pattern of 'lower tops, lower bottoms'.

As per theory of trend lines, the down trend will remain in force till the trend line gets breached convincingly. Higher volumes on recent down-days indicate that bears may not release their grip in a hurry.

On longer term weekly chart (not shown), the index received support from its 20 week EMA for the second week in a row, and closed above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but are showing negative divergences by falling below their respective Apr '17 lows.

FTSE 100 index chart pattern


Please note the following comments from last week's post on the daily bar chart pattern of FTSE 100: "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."

The index spent another week consolidating within the 'descending triangle'. It bounced up after receiving support from the 7300 level and rose above its 20 day and 50 day EMAs, but faced strong resistance from the (purple) down trend line.

None of the three daily technical indicators are showing much upward momentum. MACD and Slow stochastic are in bearish zones. RSI is in neutral zone. Expect the index to correct towards 7300 again.

The index continues to trade above its rising 200 day EMA in a bull market. As and when the 7300 level gets breached, the index can fall to 7000.

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 looking neutral to bearish. RSI is receiving support from its 50% level. MACD is falling below its signal line in bullish zone. Slow stochastic has dropped inside its oversold zone. MACD and Slow stochastic are showing negative divergences by falling below their Apr '17 lows.

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