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Overbought technical indicators had led to the following comment in last week’s post on the daily bar chart pattern of S&P 500: “Some consolidation or correction is possible.”
The index touched a new high of 3018 on Mon. Jul 15, but succumbed to profit booking and dropped to test support from its 20 day EMA. The index formed a ‘reversal day’ bar (lower low, higher close) on Thu. Jul 18, just as it had done on Tue. Jul 9, but failed to rally – losing 37 points (1.2%) on a weekly closing basis.
The index is trading above its three rising EMAs in a bull market. However, Friday’s ‘reversal day’ bar (higher high, lower close) and strong volumes on last week’s three down days show that bears are still alive and kicking.
Daily technical indicators are looking bearish. MACD crossed below its signal line and dropped from its overbought zone. RSI and Slow stochastic are falling towards their respective 50% levels. Another test of support from the 2954 level is a possibility.
On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market, but formed a ‘reversal’ bar (higher high, lower close). Weekly technical indicators are beginning to correct overbought conditions – hinting at some consolidation or correction.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 consolidated sideways with a downward bias for the second straight week. Like in the previous week, the index closed above the support level of 7529 during the first three days, but slipped below 7500 and its 20 day EMA on Thu. Jun 18.
On Fri. Jul 19, the index recovered to move above its three EMAs into bull territory, and closed almost flat on a weekly closing basis at 7509. FTSE appears to be forming a bullish ‘flag’ pattern from which an upward breakout is likely.
Daily technical indicators have turned bearish. MACD is falling below its signal line in bullish zone. RSI is falling towards its 50% level. Stochastic has dropped to the edge of its oversold zone, and can trigger a technical bounce.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory for the 7th straight week. Weekly technical indicators are in bullish zones but not showing any upward momentum. MACD is moving sideways above its signal line. RSI is also moving sideways above its 50% level. Stochastic is hovering at the edge of its overbought zone.
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