S&P 500 and FTSE 100 charts (Dec 14, 2018): bears tighten their strangleholds


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S&P 500 index chart pattern

The following remarks were made in last week’s post on the daily bar chart pattern of S&P 500: The strong index volatility during the past two months is an indication of a transition from a bull to a bear market…The impending ‘death cross’ of the 50 day EMA below the 200 day EMA will technically confirm a bear market.”

What had appeared inevitable has happened – despite a valiant effort by bulls. The ‘death cross’ of the 50 day EMA below the 200 day EMA (marked by light grey ellipse) has technically confirmed that the index has fallen into a bear market.

The index had dropped below the lower Bollinger Band to an intra-day low of 2583 on Mon. Dec 10 – only to bounce up and close 5 points higher than Friday’s close, forming a ‘reversal day’ bar (lower low, higher close).

That triggered a brief pullback rally. The index touched an intra-day high of 2685 on Wed. Dec 12, but again faced resistance from the falling 20 day SMA (blue dotted line). Bears tightened their stranglehold. The index dropped to the lower Bollinger Band on Fri. Dec 14 before bouncing up to close just below 2600 – losing 1.25% on a weekly closing basis.

Daily technical indicators are looking bearish and showing downward momentum. MACD has crossed below its signal line in bearish zone. RSI is falling below its 50% level. Slow stochastic has bounced up weakly after receiving support from the edge of its oversold zone. Expect bears to continue their ‘sell on rise’ strategy.

The US economy appears to be in peak shape. So, why has the index slipped into a bear market? It is quite elementary (as Sherlock Holmes would often say). The stock market rises and falls in a cyclical fashion that often ‘leads’ the economic cycle by several months. 

On longer term weekly chart (not shown), the index closed below its sliding 20 week and 50 week EMAs, but above its 200 week EMA in a long-term bull market. Weekly technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. RSI is falling after facing resistance from its 50% level. Slow stochastic is poised to fall inside its oversold zone.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 had touched a 2 years low of 6674 on Thu. Dec 6. A pullback rally followed. The index touched an intra-day high of 6908 on Thu. Dec 13, but faced strong resistance from its falling 20 day EMA.

Bears sold the rise. The index slipped down below 6850 to close with a weekly gain of 1%. All three EMAs are falling. FTSE is trading below them in a bear market.

The British PM won a trust vote in Parliament but is struggling to build consensus on her BrExit deal. The uncertainty is helping bears to tighten their grip on the chart.

Daily technical indicators are looking bearish. MACD is facing resistance from its falling signal line in bearish zone. RSI failed to move above its 50% level, and has turned down. Stochastic also failed to move above its 50% level. Some more correction is likely. 

On longer term weekly chart (not shown), the index bounced up a bit but closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking bearish and oversold. MACD is falling below its signal line. RSI has received support from the edge its oversold zone. Stochastic is trying to emerge from its oversold zone.

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