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The following remark appeared in last week’s post on the daily bar chart pattern of S&P 500: “As long as the index trades above its 200 day EMA, bulls need not worry too much.”
It is time for bulls to start worrying. The index successfully tested support from its 200 day EMA on May 29 and 30, but the support was breached on Fri. May 31.
The index formed a small (8 points) downward ‘gap’ below its 200 day EMA, and closed in bear territory for the first time in four months. Support at the 2750 level may not hold for long, as strong volumes on recent down days indicate bears are regaining control.
Daily technical indicators are in bearish zones, and showing downward momentum. MACD is falling below its signal line. RSI has dropped down to the edge of its oversold zone. Slow stochastic sliding deeper inside its oversold zone.
Some more correction, and a drop towards the support zone between 2700-2725 is likely. The (purple) down trend line has dominated the chart during the entire month.
On longer term weekly chart (not shown), the index closed below its 20 week and 50 week EMAs, but well above its 200 week EMA in a long-term bull market. Weekly technical indicators are looking bearish, and showing downward momentum – hinting at more correction.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 has slipped into bear territory by closing below its three daily EMAs. What had seemed like the ‘handle’ of a ‘cup and handle’ pattern is turning into a bearish ‘head and shoulders’ reversal pattern with a ‘neckline’ at 7200.
Daily technical indicators are in bearish zones and showing downward momentum. MACD has crossed below its signal line. RSI is falling below its 50% level. Stochastic has entered its oversold zone.
Some more correction is likely – which will negate the ‘cup and handle’ pattern (refer last week’s post).
On longer term weekly chart (not shown), the index closed below its merged 20 week and 50 week EMAs, but above its 200 week EMA in long-term bull territory. Weekly technical indicators are looking bearish, and showing downward momentum.
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