Indices News

By, James A. Hyerczyk Besides the obvious rectangular and triangular patterns keeping the FTSE 100 in check since July, a shorter-term look at the market shows the formation of an inverse head and shoulders chart pattern. This pattern usually indicates the potential for a strong breakout to the upside. However, as a sign of just how bearish this market has become, this pattern is beginning to show signs of failure. The first shoulder was formed following the market’s failure at 5746.90 in late October. The subsequent break to 5075.20 did not change the trend to down, but offered a buying opportunity for traders looking for an optimistic solution to the sovereign debt crisis in the Euro Zone. To bearish traders, however, it represented another opportunity to short the market at a higher level. After the inverted head was formed at 5075.20, the index went on a strong rally, fueled by central bank intervention. As the index approached the previous top or right shoulder,...

By, James A. Hyerczyk A third lower top near 749.50 helped to form the resistance line of an emerging triangle chart pattern on the US2000 chart. This triggered the start of a break that may turn into a completed chart pattern if downside momentum continues. Although the initial trend on this 1440-minute chart was up, the current weakness may be fueling a possible reversal trend change. The overall quality of the chart pattern is a slightly above average 6-bars. The initial trend which measures the strength of the trend prior to the chart pattern’s formation is rated a weak 1-bar. The solid 9-bar uniformity rating may be indicating the presence of equidistant tops and bottoms as well as a number of successful tests of the support and resistance levels. The clarity rating is determined by the amount of “spikes” and “gaps”, otherwise known as “market noise”. The 6-bar rating suggests that the clarity of the chart pattern is slightly above average. The triangle...

By, James A. Hyerczyk The evidence is in and it is official, the FTSE is rangebound, but depending on how one looks at it, it is setting up for either a prolonged sideways move or a range compression pattern followed by a volatile breakout. This is because the index is either forming a long rectangle or an almost symmetrical triangle chart pattern. A rectangular pattern will mean the index will trade with wide ranges. A triangular pattern will force the daily ranges to narrow, suppressing volatility until it breaks out. The rectangle is bounded by the July top at 6084.10 and the August bottom at 4791.00. This creates a mid-point or pivot price at 5437.55. On Thursday, the index traded on both sides of this level, indicating trader indecision. Since bottoming in August the market has used this horizontal line as resistance from early August to mid-October. From mid-October until mid-November this price was support. With the market basically trading at 50...

By, James A. Hyerczyk Traders tried to boost the FTSE 100 index on Tuesday, but failed to attract enough buyers to turn the main trend to up on even the intra-day charts. This is a sign that buyers are scarce and that short-sellers have not been frightened enough to cover their positions. Since launching an extraordinary rally two weeks ago, the FTSE has gone into what appears to be a distributive mode. This is a chart pattern that suggests the systematic liquidation of long positions and the refreshing of short-positions. As this pattern develops, bottoms and tops begin to move lower. This often leads to an acceleration to the downside. As the FTSE enters the “cascading” section of the chart pattern, downside targets are becoming more evident. Based on the last rally from 5075.20 to 5631.90, the next move to the downside could mean a correction into the 50% retracement price at 5353.55 to the 61.8% retracement level at 5287.86. There may be...

By, James A. Hyerczyk Pressure is once again mounting on the global stock indices as traders appear to have thrown in the towel on the long-side of the equation. After making its final top at 5631.90 late last week, the index has embarked on a series of lower-tops and lower-bottoms. This type of formation often leads to a sharper break that looks like a cascade. The current sideways action is indicative of a distributive chart pattern. This is an indication that bearish traders have gained control and are building short positions. Based on the last rally from 5075.20 to 5631.90, traders could be looking for the start of a retracement to 5335.55 to 5287.86. A trade into this range will mean that the entire massive rally from almost two weeks ago has been erased. The recent string of low volume days may also be a sign that long traders are leaving the market. With short-traders in control and long traders being eased out,...

By, James A. Hyerczyk The FTSE 100 index rallied with a vengeance on Friday.  Although the index closed lower for the week, the solid finish put the market in a position to continue the move this week. The question that traders have to be asking is whether this index has the buying power and upside momentum to accomplish the task. The price action was strong but the volume was weak, once again indicating that short-covering rather than strong buying may have been driving the market late in the week. Friday’s volume was a little more than half of the 1.6 billion share move on November 30. Technically, last week the FTSE had what can best be described as volatile, two-sided trading sessions. When the dust settled finally, the market had produced a higher-higher than the previous week, but a lower close. At times consecutive sideways days made it appear that a bearish distributive top was taking place. This proved to be true...

By, James A. Hyerczyk The 30-minute E-mini S&P 500 futures chart has formed an emerging flag pattern. Based on the number of successful touches of the uptrending resistance line, Autochartist is suggesting a continuation move to the downside. Although the chart pattern formation has been confirmed, the lack of follow-through to the downside suggests the possibility of a reversal move to the upside. This can be deemed a dangerous short trade; however, the risk/reward ratio appears to be favorable. The key is momentum. If sentiment is shifting to the downside, then it must show up in the form of red candlesticks. If selling pressure isn’t detected then it is suggested that traders consider a possible breakout to the upside. The 15-minute E-mini S&P 500 futures chart may be offering traders some clues as to the next move. Originally the channel up chart pattern was suggesting a breakout to the upside since the initial trend was up. The weak 1-bar rating and the confirmed...

By, James A. Hyerczyk The lack of follow-through to the upside following last week’s breakout rally and the inability to convince traders to buy strength led to a sharp decline in the FTSE 100 index on Thursday. The size of last week’s rally may have also played a role in yesterday’s decline as it looks like it may have been a case of “too much, too soon”. Based on current levels of volatility, it is just too risky to play the long side of the market after last week’s lofty gains. Besides the high level of volatility, traders must have been conscious of the FTSE’s limited upside potential and saw that it wasn’t worth the risk at current price levels. In addition, value-based traders had no interest in chasing this market higher given the fact that they could have bought the index much lower last week. Finally, one can draw the conclusion that last week’s rally was triggered by a massive amount...

By, James A. Hyerczyk Once again the FTSE 100 surged early in the trading session but failed to hold on to those gains into the close. This type of trading suggests an indecisive market. Although the index seems to be treading water at this time, it has been producing higher-tops and higher-bottoms, giving it a slight bias to the upside. The tight and narrow range suggests impending volatility but the direction is uncertain. Traders are likely to “go the way of the move” once the breakout begins. This may mean a rally similar to the one that took place a week ago. Looking at the chart, a rally into a technically defined level at 5731.00 is a possibility since there does not appear to be anything to impede it. The October 27 top at 5747.30 is another potential upside target. On the downside, short-term key support has been clearly defined as a pair of main bottoms at 5489.10 and 5486.90. A break through...

By, James A. Hyerczyk A late session rise in U.S. equity indices after the FTSE close is likely to lead to a higher opening in the index on Wednesday. The index has been slowly creeping along with a slight bias to the upside since last week’s expanded range breakout. The short-term higher-top, higher-bottom formation suggests the FTSE is getting ready to launch another breakout to the upside. With a key short-term bottom at 5521.91 and a pair of main intraday bottoms at 5489.10 and 5486.90 all investors seem to be waiting for is a breakout over the recent minor swing top at 5602.80 to confirm the market’s strength. With so much pent-up energy formed during the three-day sideways trade, there is little doubt that a breakout to the upside is going to trigger an acceleration into a key technical level at 5648.00. The current rangebound trade suggests the index is poised to continue the strong upside momentum move that took place last week....