Topping patterns on FTSE and S&P500

I think it is important to signal that FTSE and S&P are forming topping patterns  on the weekly chart.

Bottom line: monitor support levels closely because a break would mean that the cyclical (bullish) trend that started in 2011 has ended.  

 

analysis

Both indices had weekly divergences with the respective MACD indicator for a while and have recently started to weaken.

The s&P shows a clear rising wedge formation (bearish reversal pattern) while the FTSE has a diamond/head and shoulder (bearish reversal as well).

What I’ve noticed looking at them on a daily basis, is that they have been so far unable to move above previous highs and we have now a sequence of lower highs and lower lows, either intraday (SPX) or on a daily basis (FTSE).

In both cases we have clear support levels which have not been broken yet: 6000 on the FTSE and 1600 on the S&P (see charts below).

FTSE100

S&P500

Similarities between the S&P in early 2009 and gold today

I’ve touched on the subject before but today the similarities have increased even more!

 

1)      In 2009 we had a very large reverse head and shoulder pattern (indications in red) in the S&P500 which signalled a potential bottom after the 2008 bear market. The right shoulder of this pattern was in itself a (normal) head and shoulder (in green). A normal H&S argues for lower prices while a reverse H&S points to higher prices. Obviously one of the 2 has to fail and in that case it was the bearish pattern that failed, giving a clean signal that the trend was up

2)      If you look more closely to the green pattern in the SPX, you can see that prices perforated the neckline and after a couple of internal days they reversed strongly up, triggering a bear trap

3)      Now look at the 2^nd chart, showing gold as of today. You can see exactly the same pattern developing, including a break and the potential failure!

To be more confident that the pattern is going to repeat itself, we have to wait for gold to close above 1400, where the neckline passes but I suggest a close monitoring of price action since gold can move very fast sometimes.

  

SPX                                                                                                                                                                                                                                                       

GOLD