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Monday, September 25, 2017

S&P 500 and FTSE 100 charts (Sep 22 '17): bears getting ready to attack?

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 failed to build on the previous week's breakout above the 2490 level. The index touched a new high of 2509 on Wed. Sep 20, but closed almost flat for the week.

All three EMAs are rising, and the index is trading above them in a bull market. However, daily technical indicators are correcting overbought conditions and can trigger a correction or some more consolidation.

In case the index falls below the 2490 level - and the possibility can't be ruled out because of a bearish weekly pattern (see below) - expect support from the zone between 2450 & 2470.

The war of words between the US President and North Korea's 'rocket man' is creating unnecessary tension that is keeping global markets on tenterhooks. Uncertainty in the market may be just the opportunity that bears are looking for.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market, but may be in the process of forming a bearish 'evening star' candlestick pattern. Weekly technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern


The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: " ...the index is in the process of pulling back towards the 200 day EMA. Those who missed selling on Friday's downward break out can use the pullback as a selling opportunity."

The index pullback resulted in a weekly close above the 200 day EMA and the 'support/resistance' level of 7300 - with a 1.3% gain for the week.

Daily technical indicators are in the process of correcting oversold conditions, but remain in bearish zones. Any attempt at rallying further is likely to face resistance from the falling 20 day and 50 day EMAs.

A dark bearish shadow (viz. a 'descending triangle' at an index top) is covering the chart. Bulls have their work cut out to retrieve the situation.

On longer term weekly chart (not shown), the index bounced up after receiving support from its 50 week EMA, and closed well above its 200 week EMA in a long-term bull market. The 20 week EMA is forming a bearish 'rounding top' pattern. Weekly MACD is falling below its signal line in bullish zone. RSI is trying to move above its 50% level. Slow stochastic is ready to re-enter its oversold zone.

Sunday, September 24, 2017

Sensex, Nifty charts (Sep 22, 2017): bulls forced to retreat after strong attack by bears

FII net selling in equities touched a huge Rs 54.5 Billion during the week. DII net buying in equities was worth Rs 35.8 Billion, as per provisional figures. Both indices closed lower - Sensex by 1.1%, Nifty by 1.2%.

Despite the heavy selling by FIIs in equities, India's foreign exchange reserves rose by $1.8 Billion to $402.5 Billion - thanks to heavy inflows into debt.

A recent spate of infrastructure project announcements by the government - like bullet train and industrial corridors - is expected to kick-start the credit and investment cycle that will benefit the banking sector, as per a statement by the SBI chairperson.

BSE Sensex index chart pattern


The following warning bell was sounded in last week's post on the daily bar chart pattern of Sensex: "Some more consolidation within the 'flag' and a breakout below it are possibilities."

The index faced strong resistance from the upper edge of the 'flag' pattern on Mon. & Tue. (Sep 18 & 19). On Tue, it formed a small 'reversal day' bar (higher high, lower close) that triggered a sharp correction.

The index closed below its 20 day EMA but above its 50 day and 200 day EMAs in a bull market. More importantly for bulls, it closed within the 'flag' pattern.

Daily technical indicators are in bullish zones but turning bearish. MACD is falling towards its signal line. ROC has crossed below its 10 day MA. RSI and Slow stochastic have fallen down from their respective overbought zones. 

Bulls may try to prevent a fall below the 'flag', but selling by bears may overwhelm them. Expect support from the 30700 level, and below it from the rising 200 day EMA.

The NDA government has admitted its failure on the economic front by announcing a fiscal stimulus. Recent IPOs have absorbed surplus cash that could have been invested in the secondary market.

The index recovery after the correction is likely to be 'U' shaped rather than 'V' shaped. In other words, there is no need to rush in to buy the current dip.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty touched a new high of 10179, but closed 120 points lower for the week, forming a 'reversal' bar. The previous 8 weeks' trading has formed a large 'rising wedge' pattern from which the likely breakout is downwards.

The 20 week and 50 week EMAs are rising, and the index is trading above them in a bull market. However, with FIIs selling heavily, a fall below the 'wedge' and the 20 week EMA appears likely.

Weekly technical indicators are in bullish zones but showing downward momentum. MACD is sliding below its signal line inside overbought zone. ROC has dropped towards its neutral zone. RSI and Slow stochastic are below their overbought zones and drifting down.

Nifty's TTM P/E has slipped a bit from last week to 25.95, which is still much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is trying to emerge from its overbought zone and can trigger some more correction.

Bottomline? Sensex and Nifty charts have been consolidating sideways within bearish patterns, and look poised to breakout below the patterns. DII buying has been overwhelmed by FII selling. Any fiscal stimulus may further stoke inflation and widen the fiscal deficit. This may be a good time to stay away and let the correction play out.

Friday, September 22, 2017

Active Traders Focus Attention on Emerging Markets

"North American investors have started adjusting their investment allocation in favor of emerging markets in recent months in hopes of profiting from one of the strongest up trends anywhere in the public markets. 

In this article, we take a look at several charts and try to filter down exactly how international investors are looking to capture the rise in developing economies."

Read more at:


http://www.investopedia.com/news/active-traders-focus-attention-emerging-markets/

Wednesday, September 20, 2017

Nifty chart: a midweek technical update (Sep 20 ‘17)

FIIs were net sellers of equity worth Rs 30 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 16.4 Billion, as per provisional figures. Nifty touched a new closing high of 10153 on Mon. Sep 18 and a new intra-day high of 10179 on Tue. Sep 19.

After the fiasco of demonetisation, GST implementation is turning out to be another thorn in the flesh for the NDA government. The balloon of July's tax collection of Rs 950 Billion was punctured by input tax credit claims of Rs 650 Billion.

Tata Steel has announced a 50-50 joint venture in Europe with Thyssenkrupp. The JV is expected to absorb a large portion of Tata Steel Europe's debt (which was used to acquire Corus 9 years ago).


The daily bar chart pattern of Nifty touched a new high of 10179 on Sep 19, but formed a 'reversal day' bar (higher high, lower close) that often marks an intermediate top.

Despite strong selling by FIIs, large inflows into domestic mutual funds and the consequent buying by DIIs propelled the index to a new high. The index is trading well above its three rising EMAs in a bull market.

Daily technical indicators are in bullish zones. But caution is advised because MACD and RSI are showing negative divergences by touching lower tops while the index rose higher. Some correction or consolidation may follow.

The entire 7 weeks' trading from Aug '17 onward has formed a large 'rising wedge' pattern, which has bearish implications. Bulls are struggling to move the index above its Aug 2 top of 10138 in a convincing manner.

Nifty's TTM P/E is at 26.39 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is hovering just above its overbought zone, and can limit index upside.

Small investors may be feeling confused about what to do. Confusion comes from lack of a plan for long-term investing. As has been repeated ad nauseam in this blog, your asset allocation plan should decide what needs to be done regardless of the state of the market.

A bull market is supposed to climb a wall of worries. If you are tired of waiting for a correction and can't stop the urge to jump in to the market, select your stocks very carefully, and use a strict 'stop-loss' every time you buy a stock.

Tuesday, September 19, 2017

WTI and Brent Crude Oil charts: bulls finally breaking bear strangleholds

WTI Crude Oil chart


Bulls are on the verge of breaking the stranglehold of bears on the daily bar chart pattern of WTI Crude Oil

By moving above the Aug 1 top of 50.43 and touching an intra-day high of 50.85 on Sep 18, the bearish pattern of 'lower tops, lower bottoms' that dominated the chart for more than 6 months has been negated.

Bulls still have some work left before they can send bears packing. Oil's price failed to close above the Aug 1 top, and formed a 'long-legged doji' candlestick pattern - leaving the door open for another bear attack.

Sliding volumes during the month raises concerns that the rally may not sustain. The 'golden cross' of the 50 day EMA above the 200 day EMA, which will technically confirm a return to a bull market, is awaited.

Daily technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with oil's price. Slow stochastic appears to be forming a 'double top' reversal pattern inside its overbought zone, which can trigger a correction.

On longer term weekly chart (not shown), oil's price closed above its 20 week and 50 week EMAs but well below its falling 200 week EMA in a long-term bear market. Weekly MACD and RSI are looking bullish. Slow stochastic is looking overbought.

Brent Crude Oil chart


The following comments were made in the previous post on the daily bar chart pattern of Brent Crude Oil: "A 'rectangle' is usually a continuation pattern. Since oil's price entered the pattern from below during a rally, the logical breakout should be upwards (i.e. above 53)."

Oil's price broke out above the 'rectangle' on Sep 5, but the breakout wasn't accompanied by a volume surge that would have technically validated the breakout. 

It was no surprise that oil's price formed a 'reversal day' bar (higher high, lower close) on Sep 8 and pulled back to the top of the 'rectangle' on Sep 11. Those who missed buying on the breakout, got an opportunity to do so on the pullback.

Oil's price rose above 55.50, but formed another 'reversal day' bar on Sep 18, which may lead to some correction or consolidation. The 'golden cross' of the 50 day EMA above the 200 day EMA has technically confirmed a return to a bull market.

Daily technical indicators are looking bullish. Slow stochastic may be forming a 'double top' reversal pattern inside its overbought zone. That may trigger some correction or consolidation. 

On longer term weekly chart (not shown), oil's price closed above its 20 week and 50 week EMAs but well below its falling 200 week EMA in a long-term bear market. Weekly MACD and RSI are looking bullish. Slow stochastic is looking quite overbought and can limit further upside.

Monday, September 18, 2017

S&P 500 and FTSE 100 charts (Sep 15 '17): bulls rule one, bears rule the other

S&P 500 index chart pattern


The following remarks were made in last week's post on the daily bar chart pattern of S&P 500

"The index may be in the process of forming a 'diamond' pattern. A 'diamond' can be a reversal pattern or a continuation pattern. So, await the breakout before deciding to buy or sell. An upward breakout above 2480 will be bullish. A downward breakout below 2440 will be bearish."

On Mon. Sep 11, the index opened trading with an upward 'gap' and broke out above the 'diamond' pattern and the 2480 level. It closed just below 2490. During the rest of the week, the index consolidated sideways with an upward bias, and closed at a lifetime high of 2500 - with a gain of 1.6% on a weekly closing basis.

Note the large spike in volume on Fri. Sep 15. That may be the sign of a 'buying climax' that can lead to a pullback towards the 'diamond' pattern. Such a pullback will provide a buying opportunity to those who missed buying on the upward break out.

Daily technical indicators are in bullish zones. MACD is rising above its signal line in overbought zone. RSI is moving sideways below its overbought zone. Slow stochastic is well inside its overbought zone. MACD and RSI are showing negative divergences by failing to touch new highs with the index.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern


The following remark in last week's post on the daily bar chart pattern of FTSE 100 provided adequate warning to investors: "A likely downward breakout below 7300 can lead to a test of support from, or even a breach of, the 200 day EMA."

The index made a couple of futile attempts to move above the (purple) down trend line on Mon. Sep 11 & Tue. Sep 12. Bears took control right away.

On Thu. Sep 14, the index dropped and closed just below the support level of 7300. On Fri. Sep 15, the index fell sharply below the 200 day EMA and the 7200 level intra-day, before managing to close above 7200 - with a loss of 2.2% on a weekly closing basis.

(At the time of writing this post, the index is in the process of pulling back towards the 200 day EMA. Those who missed selling on Friday's downward break out can use the pullback as a selling opportunity.)

Daily technical indicators are looking bearish and showing downward momentum. Some more correction - perhaps a test of the Apr '17 low of 7100 - is possible.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA and is seeking support from its 50 week EMA, but closed well above its 200 week EMA in a long-term bull market. Weekly MACD is falling below its signal line in bullish zone. RSI has fallen below its 50% level. Slow stochastic has re-entered its oversold zone.

Sunday, September 17, 2017

Sensex, Nifty charts (Sep 15, 2017): bulls trying to regain control

FIIs were net sellers of equity worth Rs 33.6 Billion for the week. DIIs were net buyers of equity worth Rs 38.3 Billion, as per provisional figures. Sensex gained 1.8% and Nifty gained 1.5% on weekly closing basis.

WPI inflation rose to a 4 month high of 3.24% in Aug '17, against 1.88% in Jul '17 and 1.09% in Aug '16 as prices of vegetables soared.

India's exports grew 10.29% while imports grew 21% in Aug '17. The trade deficit widened to $11.64 Billion against $7.7 Billion in Aug '16 - mainly due to higher oil and gold imports. 

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex gained nearly 600 points for the week as bulls tried to regain control of the chart. The index is trading above its three rising EMAs in a bull market.

The 20 day EMA and the MACD signal line are forming bullish 'saucer' patterns, but bears have not been routed yet. 

Sensex is more than 400 points below its lifetime high of 32686 (touched on Aug 2). After breaking out above a bearish 'rising wedge' pattern (refer last week's post), the index is consolidating within a bearish 'flag' pattern.

Daily technical indicators are in bullish zones, but sending conflicting signals. MACD is rising above its signal line. ROC has dropped to seek support from its 10 day MA. RSI is retreating after facing resistance from the edge of its overbought zone. Slow stochastic is moving sideways inside overbought zone.

Some more consolidation within the 'flag' and a breakout below it are possibilities. Note that FIIs were net buyers of equity on Fri. Sep 15. If they continue buying, the scales will tip towards bulls.

Stay invested. Remain cautiously optimistic.

NSE Nifty index chart pattern




The weekly bar chart pattern of Nifty moved above the 'rising wedge' pattern formed during the previous 4 weeks, but faced resistance from the lifetime high level of 10138 (touched in the week ending on Aug 4 '17).

The past 7 weeks' trading appears to have formed an 'ascending triangle' pattern from which the likely break out is upwards.

Note that the index is in the process of forming either a continuation or a reversal pattern. Just as a bearish 'rising wedge' turned into a bullish 'ascending triangle', the pattern may further evolve to form a 'rectangle' or a 'broadening top' pattern.

The index is trading above its two rising weekly EMAs in a bull market. Bulls will regain control only after a convincing move above the lifetime high of 10138. That hasn't occurred yet. 

Weekly technical indicators are looking overbought. MACD is moving sideways below its signal line inside overbought zone. ROC  has merged with its 10 week MA and moving sideways below its overbought zone. RSI is rising towards its overbought zone. Slow stochastic is about to enter its overbought zone.

Nifty's TTM P/E is now at 26.24 - way higher than its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating near the edge of its overbought zone and can limit index upside. 

Bottomline? Sensex and Nifty charts have been consolidating sideways with upward biases for the past 5 weeks. DII buying seems to have negated the 
earlier bearishness. FIIs are still selling. Inflation and the trade deficit are rising. The low Jul '17 IIP number shows that manufacturing growth remains muted. So, caution is advised.