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The following comment appeared in last week’s post on the daily bar chart pattern of S&P 500: “Some more consolidation is possible before the index attempts to scale a new high.”
The sideways consolidation continued on Mon. Jun 17. Next day, the index formed an upward ‘gap’ that triggered a dash towards the previous (May 1) top of 2954. On Thu. Jun 20, the index touched a new high of 2958, but closed exactly at its previous top of 2954.
On Fri. Jun 21, the index touched another new high of 2964 with a volume surge, but closed lower at 2950 – forming a small ‘reversal day’ bar (higher high, lower close). A ‘reversal day’ bar at a market top can trigger a correction.
Failure to close convincingly above its previous top leaves the door open for the formation of a ‘double top’ reversal pattern – which will get confirmed only if the index falls below 2729 (the low touched on Jun 3).
Daily technical indicators are in bullish zones, but only MACD is showing some upward momentum. MACD is rising above its signal line in bullish zone. RSI has slipped down after facing resistance from the edge of its overbought zone. Slow stochastic is moving sideways well inside its overbought zone.
All three indicators are showing negative divergences by failing to touch new highs with the index. Expect bears to put up a fight to defend the 2954 level. But it might be a ‘fight for a cause long ago forgotten’. The index closed above its three rising EMAs in a bull market.
On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market. Weekly technical indicators are moving up in bullish zones, but showing negative divergences by failing to touch new highs with the index.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 bounced up after receiving good support from its 20 day EMA, and rose to touch the week’s high of 7469 on Tue. Jun 18. Bears got into the act, preventing the index from making further upward progress.
The volume spike on Fri. Jun 21 may be the sign of a selling climax. The index managed to close above the 7400 level and its three EMAs in bull territory, with a weekly gain of 0.8%.
Daily technical indicators are in bullish zones but only MACD is showing upward momentum. MACD is rising above its signal line in bullish zone. RSI is moving sideways above its 50% level. Stochastic has dropped to the edge of its overbought zone after re-entering it.
A convincing close above the previous (Apr 23) top of 7529 is required for bulls to regain control of the chart, and technically confirm completion of a bullish ‘cup and handle’ pattern (clearly visible on the 50 day EMA).
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory for the third straight week. Weekly technical indicators are turning bullish. MACD is about to cross above its signal line in bullish zone. RSI and Stochastic are rising above their respective 50% levels. Some more upside seems likely.
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