The IIP number for Oct ‘15 shot up to a 5 year high of 9.8% – albeit on a lower base. The Oct ‘14 figure was –2.7%. For the Apr-Oct ‘15 period, IIP was 4.8% compared with 2.2% in the same 7 months during the previous year.
Domestic passenger vehicle sales rose more than 10% during Nov ‘15 – aided by festive season sales. It was the 13th consecutive month of growth in sales.
The stock market won’t be able to ignore such good news much longer. Both Sensex and Nifty are near long-term support levels. Bulls may get encouraged to put up a fight.
BSE Sensex index chart
Note that the Sep ‘15 closing low of 24894 was also tested on a closing basis (as mentioned in last week’s post), but not breached.
The blue down trend line continues to dominate the chart. All three EMAs are falling, and Sensex is trading below them in bear territory.
A convincing breach of the 24834 level can cause a sharp drop to the 150 points ‘gap’ formed on the chart in May ‘14 due to the NDA election victory euphoria.
Will it be just a short-covering bounce? Or, will the index form a ‘double bottom’ reversal pattern and resume its up trend?
The answer to the first question is: ‘Yes – as per current technical set-up’. Only if FIIs resume buying of index stocks – unlikely before the beginning of the New Year – can the second question be answered in the affirmative.
NSE Nifty 50 index chart
The index continues to trade below the blue down trend line and its two weekly EMAs in bear territory. If the 7540 level gets breached convincingly, Nifty can fall another 10%.
Weekly technical indicators are in bearish zones. MACD and ROC are showing downward momentum. Slow stochastic is moving sideways with a downward bias.
RSI is showing positive divergence by rising during the past four weeks, while the index has fallen lower. That may provide bulls with enough incentive to fight back.