Sensex closed marginally lower, while Nifty closed flat for the week. Both indices consolidated sideways as there were no fresh triggers for bulls or bears.
Q1 (Jun '16) results have been a mixed bag so far. Positive surprises have been few and far between. All eyes and ears will be tuned to the likely passing of the GST bill in the current session of parliament.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex has been consolidating sideways within a 400 points range for the past two weeks. All three EMAs are rising, and the index is trading above them in a bull market.
The likely breakout from the consolidation zone is upwards. However, upside may be limited as Sensex P/E is at 20.34, which is above the long-term average level.
Daily technical indicators have corrected overbought conditions, but remain in bullish zones. Some more consolidation or correction may follow.
The index appears to be in a 'wait and watch' mode - waiting for more Q1 (Jun '16) results to be announced before making the next move.
Several mid-cap and small-cap stocks are making sharp upward moves. Don't chase them. If you are holding them, book partial profits, or hold with a suitable trailing stop-loss.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty spent its 9th week within a bearish 'rising wedge' pattern, from which the likely breakout is downwards.
Note that the 20 week EMA has crossed above the 50 week EMA, and both EMAs are rising. The index is trading well above them and looking overbought.
Weekly technical indicators are in their overbought zones, and showing some signs of correcting. The breadth indicator, NSE TRIN (not shown), is also inside its overbought zone, and hinting at some more consolidation or correction.
FII buying is preventing Nifty from falling sharply. But Nifty P/E is at 23.43 - well above its long-term average. At some point, FIIs will book some profit.
Bottomline? Sensex and Nifty charts show that bulls and bears were evenly matched last week, with just a slight advantage for the bears. Index valuations on a TTM basis are becoming expensive. Wait for Q1 (Jun '16) results season to play out.