Monday, April 30, 2018

S&P 500 and FTSE 100 charts (Apr 27, 2018): bears give up some ground

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 had broken out below the 'rising wedge' pattern intra-day on Fri. Apr 20, but managed to close exactly at the lower edge of the 'wedge'. 

On Mon. Apr 23, the index attempted a pullback that faced twin resistances from the lower edge of the 'wedge' and the 50 day EMA. The index slipped down to close below the 'rising wedge' at Friday's closing level of 2670.

That was a signal for bears to attack. The index dropped sharply towards its 200 day EMA intra-day on Tue. Apr 24, before recovering to close at 2635. On Wed. Apr 25, the index dropped lower intra-day - testing support from its 200 day EMA - and bounced up to close slightly  higher at 2639.

The 'reversal day' bar (lower low, higher close) triggered a brief rally that faced strong resistance from the 50 day EMA. The index ended absolutely flat on a weekly closing basis.

Daily technical indicators are looking neutral to bearish, and are not showing any upward momentum. MACD is trying to rise above its signal line in bearish zone. RSI and Slow stochastic are at their respective 50% levels after brief dips into bearish zones.

The index has stayed above its 200 day EMA in bull territory for three straight weeks. But as long as it trades below 'GAP 1' and 'GAP 2', bears may continue to 'sell on rise' to retain their advantage.

On longer term weekly chart (not shown), the index formed a 'hanging man' candlestick and closed exactly at its 20 week EMA for the second week in a row, but above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is falling below its signal line in bullish zone. RSI is in neutral zone. Slow stochastic has bounced up from the edge of its oversold zone but remains in bearish zone. 

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 tested resistance from the 7440 level on Tue. Apr 24 but failed to cross above it. Bears forced a temporary pullback to the 200 day EMA on Wed. Apr 25.

The index found strong support at its long-term average and rallied past 7440 and the psychological 7500 level on Fri. Apr 27 - gaining 1.8% on a weekly closing basis. 

By closing at 7502 - above the Fibonacci 61.8% retracement level of its entire 916 points fall (refer last week's post) - the index is on the verge of reversing the down trend from the Jan 12 top.

The 20 day EMA is about to cross above the 200 day EMA. The 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market.

All three daily technical indicators are inside their overbought zones and showing upward momentum. The index rally is not over yet. However, some consolidation or correction will improve the technical 'health' of the chart. (At the time of writing this post, the index is trading 40 points higher.)

On longer term weekly chart (not shown), the index closed above its merged 20 week and 50 week EMAs, and well above its 200 week EMA in a long-term bull market. Weekly MACD and RSI are rising in bearish zones. Slow stochastic is in bullish zone.

Sunday, April 29, 2018

Sensex, Nifty charts (Apr 27, 2018): poised at crossroads after filling downward gaps

FIIs were net sellers of equity on all five trading days. Their total net selling during the week was worth Rs 30.6 Billion. DIIs were net buyers of equity on all five trading days. Their net buying was worth Rs 26.5 Billion, as per provisional figures.

Counter-trend rallies on Sensex and Nifty charts have filled downward 'gaps' formed on Feb 5. Sensex gained 1.6% and Nifty gained 1.2% on a weekly closing basis - thanks to sharp gains in heavyweight TCS and RIL stocks.

India's economy faces a wider trade deficit, a worsening of stretched government finances, and slower economic growth if oil prices remain stubborn at the current level. That would challenge policy makers trying to strengthen the economy in time for elections next year.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex has reached an important technical crossroad. By touching an intra-day high of 35065 on Fri. Apr 27, the index completely filled the 132 points downward 'gap' formed on Feb 5.

The weekly closing level of 34970 means that the index closed above the 61.8% Fibonacci retracement level of the 3960 points fall from the Jan 29 top to the Mar 23 low. Despite macro headwinds, bulls have managed to overcome two important resistances.

However, bulls should postpone celebrations at least till next week. Why? Because filling a 'gap' is usually followed by a resumption of the previous move. In this case, the move before the 'gap' got formed was downward.

Technical 'rules' are not rules at all. They are based on empirical observations of what has happened on many such previous occasions. So, it may be a good idea to wait and see if this time will be different.

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line towards its overbought zone. ROC is about to re-enter its overbought zone. RSI and Slow stochastic are well inside their overbought zones. 

ROC, RSI and Slow stochastic are showing negative divergences by failing to touch new highs with the index. Continuous DII buying may be able to prevent a big correction, but a retreat from the 'gap' zone and some consolidation is quite possible.

Karnataka state elections on May 12 - expected to be a close contest - is a wild card in the near term. A BJP win will temporarily boost the stock market. A Congress win will not. 

NSE Nifty index chart pattern



Five straight weeks of gains took the weekly bar chart pattern of Nifty to an intra-week high of 10720 - partly filling the 33 points downward 'gap' formed on Feb 5.

The index closed the week at 10692 - just below the 'gap'. The 61.8% Fibonacci retracement level of the 1220 points fall from the Jan '18 top to the Mar '18 low is 10706. By failing to close above it, the door has been kept ajar for bears.

Part (or complete) filling of a 'gap' is usually followed by a resumption of the previous move - which was downwards. Lower tops on volume bars is also giving a hint that a correction or consolidation may follow.

Weekly technical indicators are giving mixed signals despite the strong counter-trend rally. MACD is trying to cross above its falling signal line in bullish zone. ROC has moved above its 10 week MA and entered bullish zone. Slow stochastic has risen to its 50% level in neutral zone. RSI is forming a bearish 'rounding top' pattern below its 50% level.

All four indicators are showing negative divergences by failing to reach their previous levels (marked by grey vertical line) touched in the week ending on Feb 9.

Bottomline? Counter-trend rallies have filled the Feb 5 downward gap on Sensex and partly filled the downward gap on Nifty. Some correction and/or consolidation is possible after 5 straight weeks of gains. High oil prices, a weakening Rupee and a widening trade deficit doesn't augur well for India's economic growth. Q4 (Mar '18) corporate results will determine how much further the rallies will go

Wednesday, April 25, 2018

Nifty chart: a midweek technical update (Apr 25, 2018)

FIIs were net sellers of equity on all three days of trading this week. Their total net selling was worth Rs 12.4 Billion. DIIs were net buyers of equity on all three days. Their total net buying was worth Rs 13.3 Billion, as per provisional figures.

The counter-trend Nifty rally from the Mar 23 low has retraced 50% of the fall from the Jan 29 top, and is facing a bit of resistance near the previous intra-day high of 10638 (touched on Feb 8).

According to Nomura, investment and consumption demand will drive India's YoY GDP growth to 7.8% during the first half of 2018. A Deutsche Bank report is expecting a 25 bps repo rate hike by RBI in Jun '18 or Aug '18 due to the inflationary effects of high oil prices. 


A month long counter-trend rally on the daily bar chart pattern of Nifty has managed to climb over a wall of worries and resistance levels before pausing at the 10638 level.

10638 was the intra-day high on Feb 8 - which was tested on Feb 27 before the sharp fall to the Mar 23 intra-day low of 9952. Nifty tested 10638 again on Mon. & Tue. (Apr 23 & 24) before slipping down today.

Note that today's correction breached the (purple) up trend line intra-day, but the index closed exactly on the trend line. Bulls may feel encouraged to breach 10638 on Thu. Apr 26 (which is F&O expiry day).

Daily technical indicators are in bullish zones, but not showing any upward momentum. MACD is above its signal line, but may be forming a bearish 'rounding top' pattern. RSI's gradual up move towards its overbought zone has been halted. Slow stochastic is sliding down inside its overbought zone.

All three EMAs are rising, and Nifty is trading above them in a bull market. However, bears will remain in control as long as the index trades below the 33 points downward 'gap' formed on Feb 5.

As per 'gap theory': even if the 'gap' is filled partly or completely, the down move should resume thereafter. With FIIs in selling mode, a breach of the (purple) up trend line is the more likely near-term outcome.  

Nifty's TTM P/E has moved up to 26.24 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is rising quickly in neutral zone, and can trigger some correction or consolidation.

Small investors should stay invested as per their asset allocation plans. With Q4 (Mar '18) results season getting into full swing, concentrate on individual stocks instead of worrying about index movements.

Tuesday, April 24, 2018

WTI and Brent Crude Oil charts: heading higher after breaching resistance zones

WTI Crude Oil chart


After faltering slightly on its third attempt, the daily bar chart pattern of WTI Crude Oil finally managed to breach the 'resistance zone' between 66 & 67 with good volume support on Wed. Apr 18.

Oil's price touched a 3 yr high of 69.56 on Thu. Apr 19, but formed a 'reversal day' bar (higher high, lower close) that triggered a pullback to the top of the 'resistance zone' on Mon. Apr 23.

Oil's price formed another 'reversal day' bar (lower low, higher close), which is pointing to further upside, and closed well above its three rising EMAs in a bull market.

Daily technical indicators are looking bullish and a bit overbought. MACD is rising above its signal line inside its overbought zone. RSI is moving sideways just below its overbought zone. Slow stochastic is moving sideways inside its overbought zone.

Some consolidation can be expected around current prices before oil's price can move higher.

On longer term weekly chart (not shown), oil's price closed above its three rising weekly EMAs. The impending 'golden cross' of the 50 week EMA above the 200 week EMA will technically confirm a return to a long-term bull market.  Weekly technical indicators are looking overbought and showing negative divergences by failing to touch new highs with oil's price.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil broke out above the 'resistance zone' between 70 & 71.30 with strong volume support on Wed. Apr 11.

After a pullback that dropped inside the 'resistance zone' intra-day on Apr 16 & 17, oil's price soared away to touch a new 3 yr high of 75.10 on Mon. Apr 23 - and may be heading even higher.

Oil's price is trading well above its three rising EMAs in a bull market, but is looking overbought. All three daily technical indicators are inside their respective overbought zones. Some correction or consolidation is likely.

"Between Jan and Apr 2018, U.S. crude oil and condensate exports to Europe jumped fourfold compared to the same period of 2017... A wider WTI/Brent spread has been supportive of increased and cheaper U.S. oil supply into Europe compared to Russian, Nigerian, and other crude grades."

On longer term weekly chart (not shown), oil's price closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are looking overbought and showing negative divergences by failing to touch new highs with oil's price.

Monday, April 23, 2018

S&P 500 and FTSE 100 charts (Apr 20, 2018): bulls fight back but bears retain upper hand

S&P 500 index chart pattern


The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "The first and most critical task for bulls will be to cover/fill 'GAP 3' and 'GAP 2'. Even if both 'gaps' are filled the index can be expected to resume its correction."

Bulls did manage to completely fill 'Gap 3' during last week's trading, but faced resistance from the 2710 level. Bears decided to 'sell on rise'. The index dropped below its 20 day and 50 day EMAs to touch an intra-day low of 2660 on Fri. Apr 20, before closing 10 points higher at its 20 day EMA.

The index appears to have formed a bearish 'rising wedge' pattern (labelled 'Rising Wedge 2'), from which the likely break out is downwards. Strong volumes on Thu. & Fri. are hinting at such a downward break out.

Note that the index had earlier formed 'Rising Wedge 1' during Feb-Mar '18 from which it broke out downwards with a 'gap' (labelled 'Gap 2) on Mar 19. Filling 'Gap 2' should be the next upward target for bulls.

Daily technical indicators are starting to turn bearish. MACD is above its signal line, but facing resistance from its '0' line in neutral zone. RSI has slipped below its 50% level in neutral zone. Slow stochastic is poised to drop from its overbought zone, and can trigger a break out below 'Rising Wedge 2'.

The index is trading above its 200 day EMA in bull territory. However, bears will retain the upper hand as long as the index trades below 'Gap 1'.

On longer term weekly chart (not shown), the index formed a 'shooting star' candlestick and closed at its 20 week EMA but above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is falling below its signal line in bullish zone. RSI is in neutral zone. Slow stochastic has bounced up from the edge of its oversold zone but remains bearish. 

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 corrected to close just below 7200 and the 50 day EMA on Mon. Apr 16. The next day, it touched a lower intra-day low of 7190 but closed higher at 7226. 

The 'reversal day' bar (lower low, higher close) triggered a smart rally past 7300 and the sliding 200 day EMA into bull territory. The index closed at 7368 on Fri. Apr 20, with a 1.4% weekly gain.

Daily technical indicators are looking bullish and a bit overbought. MACD is rising above its signal line in bullish zone. RSI is rising towards its overbought zone. Slow stochastic is forming a 'double top' reversal pattern inside its overbought zone, and can trigger some correction/consolidation. 

The next overhead resistance can come from the long-term 'support/resistance' level at 7440. (At the time of writing this post, the index has slipped a bit but remains above its three EMAs in bull territory.)

FTSE is in the process of correcting its entire fall of 916 points from its Jan 12 top to its Mar 23 low. By touching 7368 on Fri. Apr 20, the index has retraced a little more than 50% of its fall. 

The next upward target is the Fibonacci 61.8% retracement level of 7443 - which is almost identical to the long-term 'support/resistance' level of 7440. This is one of those interesting coincidences that often occur on technical charts.

On longer term weekly chart (not shown), the index closed above its merged 20 week and 50 week EMAs, and well above its 200 week EMA in a long-term bull market. Weekly technical indicators have corrected oversold conditions. MACD and RSI remain in bearish zones. Slow stochastic is in neutral zone.

Sunday, April 22, 2018

Sensex, Nifty charts (Apr 20, 2018): counter trend rallies pause at resistance zones

FIIs were net sellers of equity on all five trading days. Their total net selling during the week was worth Rs 28.2 Billion. DIIs were net buyers of equity on four out of the five trading days. Their net buying was worth Rs 21.2 Billion.

Sensex and Nifty are in the midst of counter-trend rallies that have paused after retracing 50% of their entire falls from their Jan '18 tops to their Mar '18 lows. Sensex gained 0.65% and Nifty gained 0.8% on a weekly closing basis.

As per a report by the PHD Chamber of Commerce, after-effects of demonetisation and delays in GST refunds curtailed India's exports in FY 2017-18 amid a revival in global demand. A moderate 10% growth in exports led to a 45% jump in India's trade deficit.

In the Jan-Mar '18 period, there were 205 PE (Private Equity) deals worth US$ 4.0 Billion. In the same period a year ago, 196 deals involved US$ 2.27 Billion, according to a report by tax and advisory firm Grant Thornton. 

BSE Sensex index chart pattern


The counter-trend rally on the daily bar chart pattern of Sensex appears to have hit a road block at the 34450 level - which is the upper boundary of the 'resistance zone' (marked by dotted rectangle).

Bears were expected to defend the 'resistance zone', and they have done it thus far. The (blue) up trend line from the Mar '18 low has admirably supported the counter-trend rally.

The index is at the important technical level of 34450, which happens to be the 50% Fibonacci retracement level of the entire fall from the Jan 29 top to the Mar 23 low. Technical traders often treat the 50% retracement level as a trend-deciding level.

The 20 day EMA has crossed above the 50 day EMA, and all three EMAs are rising - with the index trading above them in a bull market. However, daily technical indicators are looking overbought and hinting at a near-term correction.

MACD is rising above its signal line in bullish zone, but its upward momentum is decelerating. ROC has formed a 'triple-top' reversal pattern inside its overbought zone and dropped below its 10 day MA. RSI may be forming a 'double-top' reversal pattern inside its overbought zone. Slow stochastic has started to correct inside its overbought zone.

Bears are getting ready to reverse the counter-trend rally. In case the rally continues, expect strong resistance from the 132 points 'gap' formed on Feb 5. Partial profit booking may be a good idea. 

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty crossed above the 'resistance zone' between 10490 and 10550, and just managed to close above the zone in bull territory. But bulls need not get overjoyed.

Note that trading volumes have been falling for the past three weeks. The counter-trend rally from the Mar '18 low is obviously losing steam.

Weekly technical indicators are looking neutral to bullish. MACD is trying to move up in bullish zone, but remains below its falling signal line. ROC has crossed above its 10 week MA. RSI is facing resistance from its 50% level. Slow stochastic is rising towards its 50% level.

Any further continuation of the counter-trend rally is expected to receive strong resistance from the 33 points downward 'gap' formed on Feb 5. Bears will remain in charge as long as the index trades below the 'gap'.

Nifty's TTM P/E has moved up to 26.22 - which is much above its long-term average. The breadth indicator NSE TRIN (not shown) has bounced up from the edge of its oversold zone, and can trigger a correction. 

Bottomline? Sensex and Nifty charts are in the midst of counter-trend rallies that have paused at resistance zones - as if waiting for improvement in Q4 (Mar '18) corporate results before deciding on their next directional moves. High oil prices, a weakening Rupee and a widening trade deficit doesn't augur well for India's economic growth. Some correction and/or consolidation is likely. 

Friday, April 20, 2018

What India’s Top Three Mutual Funds Bought And Sold In March 2018

Inflows into equity mutual funds hit a 13 month low in March as net investments into these funds declined 59 percent over the previous month to Rs 66.6 Billion, according to Association of Mutual Funds in India data. 
That’s despite a record inflow of Rs 37 Billion into equity-linked savings schemes in the last month of the financial year to help save on income tax.
Here’s what India’s top three fund houses bought and sold in March:

Wednesday, April 18, 2018

Nifty chart: a midweek technical update (Apr 18, 2018)

FIIs were net sellers of equity on all three days of trading this week. Their total net selling was worth Rs 21.7 Billion. DIIs were net buyers of equity on Tue. & Wed. (Apr 17 & 18) but net sellers on Mon. Apr 16. Their total net buying was worth Rs 15.6 Billion, as per provisional figures.

For the 13th trading day in a row, Nifty touched a higher intra-day high (of 10594 today) as it continued its counter-trend rally from its Mar 23 low of 9952, but failed to close above the Fibonacci resistance zone (between 10400 & 10550 - refer last week's post).

The International Monetary Fund (IMF) has projected India's GDP growth rate at 7.4% in FY 18-19 and 7.8% in FY 19-20 against 6.7% in FY 17-18 - making it the world's fastest growing major economy.



After 9 consecutive days of gains, the daily bar chart pattern of Nifty formed a 'reversal day' bar (higher high, lower close) today, and closed lower within the Fibonacci resistance zone. A 'reversal day' bar often forms at an intermediate top.

All three EMAs are rising, and Nifty closed above them in bull territory. However, bulls still have a lot of work left. The 33 points downward 'gap' looming overhead is expected to provide strong resistance - as and when Nifty makes an attempt to fill it.

Daily technical indicators are in bullish zones, but only MACD is showing upward momentum as it rises above its signal line. RSI and Slow stochastic are poised to move down. The index can correct or consolidate within the resistance zone.

The (purple) up trend line from the Mar 23 low is a bit steep, so its downward breach may not be too bearish. But a fall below 10400 will signal the next leg of the down move from Nifty's Jan 29 top. 

Nifty's TTM P/E has moved up to 26.13 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped inside its overbought zone, and can limit index upside.

Small investors shouldn't get too enamoured by the counter-trend rally. Such rallies are often sharp, but can flatter to deceive. On the macroeconomic front, rising oil prices and a falling Rupee is stirring up a deadly cocktail that can stoke inflation and force RBI to raise interest rates. 

Tuesday, April 17, 2018

Gold and Silver charts: sideways consolidations continue

Gold chart pattern


The daily bar chart pattern of Gold continued its sideways consolidation between the 'Support zone' (1300-1310) and the 'Resistance zone' (1360-1370). The consolidation has entered its 4th month.

The entire consolidation has occurred above the rising 200 day EMA in a bull market. So, the logical break out from the consolidation should be upwards. But markets don't always follow or understand logic - at least in the near term.

Note that gold's price made a futile attempt to cross above the 'resistance zone' on Wed. Apr 11, and dropped to close at 1360 (lower edge of the 'resistance zone'). The accompanying volume surge may be a sign of 'buying climax'.

Gold's price corrected below its rising 20 day EMA intra-day on Fri. Apr 13, but bounced up to close above its three rising EMAs in bull territory.

Daily technical indicators are giving conflicting signals - which is often the case during periods of consolidation. MACD is showing slight upward momentum in bullish zone. RSI is moving sideways above its 50% level. Slow stochastic has fallen to its 50% level. 

RSI and Slow stochastic touched lower tops on Apr 11 while gold's price rose higher. The negative divergences can trigger a corrective move towards the 'support zone'.

On longer term weekly chart (not shown), gold’s price closed above its three rising weekly EMAs in long-term bull territory.  Weekly technical indicators are in bullish zones, but not showing any upward momentum. Some more consolidation is likely.

Silver chart pattern


The following remarks were made in the previous post on the daily bar chart pattern of Silver: "A rally above the 200 day EMA is a possibility. Bears are likely to use the opportunity to sell again."

Silver's price rallied above its sliding 200 day EMA intra-day on Wed. Apr 11, only to face strong resistance from the 16.90 level (lower edge of the 'resistance zone') and closed just below the 200 day EMA.

On Apr 12, silver's price faced selling pressure and closed below its three EMAs in bear territory. It has since bounced up above its 20 day and 50 day EMAs.

The sideways consolidation between the 'Support zone' (16.10-16.20) and the 'Resistance zone' (16.90-17.00) has entered its 3rd month. The longer the consolidation, the stronger can be the eventual break out.

The entire consolidation has occurred below the sliding 200 day EMA in a bear market. So, the logical break out from the consolidation should be downwards. However, it may be prudent to wait for the break out before taking any buy/sell decision.

Daily technical indicators are in bullish zones, but not showing any upward momentum and hinting at some more consolidation.

On longer term weekly chart (not shown), silver’s price closed at its 20 week EMA, but below its sliding 50 week and 200 week EMAs in a long-term bear marketWeekly MACD and Slow stochastic are in bearish zones. RSI is in neutral zone.

Monday, April 16, 2018

S&P 500 and FTSE 100 charts (Apr 13, 2018): bears refusing to release their strangleholds

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 rallied above its 20 day EMA only to face strong resistance from its falling 50 day EMA on Fri. Apr 13. The index formed a 'reversal day' bar (higher high, lower close) and dropped below its 20 day EMA, but recovered to close just above it.

The index gained 2% on a weekly closing basis. Note that the counter-trend rally from the Apr 2 low of 2554 has been accompanied by sliding volumes - which doesn't augur well for the sustainability of the rally.

Daily technical indicators are giving conflicting signals. MACD and Slow stochastic are showing upward momentum. MACD has crossed above its signal line, but remains well within its bearish zone. Slow stochastic is about to enter its overbought zone. RSI is facing resistance from its 50% level.

The index has formed three unfilled downward 'gaps' - marked 'GAP 1', 'GAP 2' and 'GAP 3'. 'GAP 1' - formed on Jan 30 - is a 'breakaway gap' that triggered the correction. The subsequent sharp increase in volumes is an indication that 'GAP 1' may not get filled for a long while.

'GAP 2' and 'GAP 3' - formed on Mar 19 & 22 - are 'runaway gaps' (also called 'measuring gaps' because they tend to form at the mid-point of a move). Since the two gaps are in close proximity, the mid-point of the down move can be selected as the mid-point between the two gaps - which is at about 2720.

That gives a downward index target of about 2590, which has already been met on Apr 2. So, the current leg of the correction is over, but bulls have their work cut out if they want to get back to their glory days. The missile attack on Syria is not going to help the bullish cause.

The first and most critical task for bulls will be to cover/fill 'GAP 3' and 'GAP 2'. Even if both 'gaps' are filled the index can be expected to resume its correction.

On longer term weekly chart (not shown), the index faced resistance from its 20 week EMA for the third straight week, but managed to close above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD and Slow stochastic are looking bearish. RSI is in neutral zone.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 rallied past its falling 50 day EMA and the resistance level of 7200 during the week. The index closed above the 7250 level with a weekly gain of 1.1%.

Daily technical indicators are bullish. MACD is rising above its signal line in bullish zone. RSI has crossed above its 50% level. Slow stochastic is well inside its overbought zone, and can trigger some correction/consolidation.

If the counter-trend rally continues, expect overhead resistance from the 7300 level and the sliding 200 day EMA. (At the time of writing this post, the index is struggling to stay above 7250.)

The combined missile attack on Syria by USA, UK and France last Saturday (Apr 14) may have provided another excuse to bears to 'sell on rise'.

On longer term weekly chart (not shown), the index closed above its 200 week EMA in a long-term bull market, but is facing resistance from its 20 week and 50 week EMAs. Weekly technical indicators are correcting oversold conditions, but remain in bearish zones. 

Sunday, April 15, 2018

Sensex, Nifty charts (Apr 13, 2018): counter trend rallies reach resistance zones

FIIs were net sellers of equity on three out of the five trading days. Their total net selling during the week was worth Rs 16.5 Billion. DIIs were net buyers of equity on four out of the five trading days. Their net buying was worth Rs 8.2 Billion.

Sensex and Nifty are in the midst of counter-trend rallies that are retracing the entire falls from their Jan '18 tops to their Mar '18 lows. Sensex gained 1.7% and Nifty gained 1.4% on a weekly closing basis.

India's trade deficit widened to US $156.8 Billion in FY 17-18 against $108.5 Billion in FY 16-17. Exports grew 9.8% to $302.8 Billion, but imports grew 19.6% to $459.7 Billion.  

BSE Sensex index chart pattern



The following remarks were made in last week's post on the daily bar chart pattern of Sensex: "Sensex is trying to retrace the 3960 points fall from the Jan 29 top of 36444 to the Mar 23 low of 32484. Fibonacci retracement levels of 38.2% and 50% means near-term upward index targets of about 34000 to 34450."

The dotted box on the chart represents the zone between 34000 and 34450. Sensex crossed above the resistance level of 33800, and closed in the middle of the resistance zone. 

Bears can be expected to defend the resistance zone - and may get extra impetus from Saturday's (Apr 14) missile attack on Syria by USA, UK and France that can send oil prices higher.

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line and has re-entered bullish territory after two months. ROC and Slow stochastic are inside their respective overbought zones. RSI appears ready to enter its overbought zone.

Sensex has been in an up trend since touching its Mar 23 low, and closed above its three EMAs in bull territory. Can it rally further? The possibility can't be ruled out. The 132 points 'gap' formed on Feb 5 is likely to provide strong overhead resistance.

Incidentally, the trend-deciding 61.8% Fibonacci retracement level of the 3960 points fall from the Jan 29 top to the Mar 23 low is at 34931 - which is bang in the middle of the 'gap'. 

As per 'gap theory', an index (or stock) should resume its previous trend after a 'gap' gets partly or completely filled. Sensex was already falling when the 'gap' was formed. It should resume its down trend if and when the 'gap' gets filled.

What should small investors do? Check Q4 (Mar '18) results and take stock specific buy/sell decisions instead of worrying about index movements.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty crossed above its 20 week EMA into bull territory, but is facing resistance from the zone between 10490 & 10550. 

Note that the 10550 level - which is the 50% Fibonacci retracement level of the 1220 points fall from the Jan '18 top to the Mar '18 low - may provide strong resistance.

The 61.8% Fibonacci retracement level, which technical experts often use as a trend-deciding level, is at 10706 - right in the middle of the 33 points 'gap' formed on Feb 5. Bears can be expected to become active if the index rallies further towards the 'gap'.

Weekly technical indicators are turning bullish, and hinting at some more upside. MACD has stopped falling, and is moving sideways below its falling signal line in positive zone. ROC is about to cross above its falling 10 week MA in bearish zone. RSI is in neutral zone. Slow stochastic has emerged from its oversold zone. 

Nifty's TTM P/E has moved up to 26.01 - which is much above its long-term average. The breadth indicator NSE TRIN (not shown) has fallen sharply from its oversold zone, and can cap index upside. 

Bottomline? Sensex and Nifty charts are in the midst of counter-trend rallies that have reached resistance zones. Some correction and/or consolidation is likely. Await Q4 (Mar '18) results before deciding to buy/sell.

Saturday, April 14, 2018

Singapore's Nifty Giraffe Beats India Stock Data Ban by a Neck

Singapore Exchange Ltd. has announced a new product that an excited hedge-fund manager described to me as the "most brilliant use of finance."
That's an exaggeration, of course, though with a large grain of truth.
SGX will launch three derivative products in June: SGX India futures; SGX India options; and SGX India bank futures. For 29 out of 30 days, these contracts won't be anchored by any underlying security or index; they will be whatever their buyers and sellers want them to be.
Read more here.

Friday, April 13, 2018

Warren Buffett and Ray Dalio agree on what to do when the stock market tanks

"The money is made in investments by investing and by owning good companies for long periods of time." - Warren Buffett

"It's when you're not scared you probably want to sell, and when you are scared, you probably want to buy." - Ray Dalio

Read more from this recent cnbc.com article.

Wednesday, April 11, 2018

Nifty chart: a midweek technical update (Apr 11, 2018)

FIIs were net sellers of equity on Mon. & Tue. (Apr 9 & 10) but net buyers today. Their total net selling was worth Rs 16.2 Billion. DIIs were net buyers of equity on all three days. Their total net buying was worth Rs 11.2 Billion, as per provisional figures.

Nifty managed to gain 85 points (0.8%), but is facing resistance from its 50 day SMA (at 10425) and has formed a small 'hanging man' candlestick pattern that can end the recent rally from the low of 9952 (touched on Mar 23).

India's 'Goldilocks economy' is getting derailed by rising oil prices and major scams in PSU and Private banks. Expectations of significant improvement in India Inc's Q4 (Mar '18) results may be belied.


The daily bar chart pattern of Nifty broke out convincingly above the downward-sloping channel (refer last week's update) and the 20 day EMA on Thu. Apr 5.

The index continued its rally above the 50 day EMA and the resistance level of 10400 into bull territory. However, the rally from the Mar 23 low has been a bit too steep. Such steep rallies can't be sustained for long.

Nifty is in the process of retracing the entire 1220 points fall - from the Jan 29 top of 11172 to the Mar 23 bottom of 9952. Fibonacci retracement levels of 38.2% and 50% give upward index targets of 10418 and 10562.

The first target has already been met today. Since technical targets are never exact, a Fibonacci retracement zone has been marked on the chart between 10400 and 10550. This zone is likely to provide strong resistance to the rally.

Looming above the Fibonacci retracement zone is an ominous dark cloud - the 33 points downward 'gap' formed on Feb 5. It seems unlikely that this particular leg of the rally will be able to conquer the 'gap'.

A more likely scenario could be some near-term consolidation or correction followed by a stronger attempt by bulls to get past the Fibonacci retracement zone. 

Note that the 61.8% Fibonacci retracement level of the 1220 points correction (from Jan 29 top to Mar 23 bottom) is 10706 - which happens to be just inside the downward 'gap' formed on Feb 5. 

Conquering the 'gap' will be of utmost importance for Nifty bulls, but it may not happen in 2018. As per 'theory of gaps', the index down move should resume if and when the 'gap' is partly or completely filled.

Daily technical indicators are looking bullish. MACD is rising above its signal line and is poised to enter bullish zone. RSI is moving sideways above its 50% level. Slow stochastic is well inside its overbought zone, and can trigger a correction or consolidation.

Nifty's TTM P/E has moved up to 25.86 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped from its oversold zone, and can cap index upside.

At a time like this, with Q4 (Mar '18) results around the corner, waiting can be an excellent strategy. However, planned SIPs should be continued.

Tuesday, April 10, 2018

WTI and Brent Crude Oil charts: retreat from resistance zones

WTI Crude Oil chart


The daily bar chart pattern of WTI Crude Oil retreated from the strong resistance zone between 66 & 67 and dropped to close below its 20 day and 50 day EMAs on Apr 6.

Oil's price bounced up after receiving support from the (purple) up trend line on Apr 9 to close just above its 20 day EMA - and well above its rising 200 day EMA in a bull market.

Daily technical indicators are looking neutral to bearish, and not showing any upward momentum. MACD is falling below its signal line in bullish zone. RSI is at its neutral zone. Slow stochastic is falling in bearish zone.

Strong volumes on recent down days indicate that bears are active. If the up trend line gets breached, oil's price can drop to 58. Any rally towards the resistance zone will induce bear selling.

On longer term weekly chart (not shown), oil's price closed above its three weekly EMAs in long-term bull territory, but maybe forming a 'double top' reversal patternWeekly technical indicators are in bullish zones but not showing any upward momentum.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil retreated after facing strong resistance from the resistance zone between 70 & 71.30, and dropped to close below its 20 day EMA on Apr 6.

Oil's price bounced up after receiving support from its 50 day EMA on Apr 9, and closed above its three rising EMAs in bull territory.

Daily technical indicators are looking neutral to bearish, and not showing any upward momentum. MACD has slipped below its signal line in bullish zone. RSI and Slow stochastic are at their respective neutral zones.

Oil's price can make another attempt to cross above the resistance zone. Bears may try to push oil's price down towards the up trend line. 

Rising global oil production and US oil exports can derail the rally in oil prices.

On longer term weekly chart (not shown), oil's price closed above its three weekly EMAs in long-term bull territory, but maybe forming a 'double top' reversal patternWeekly technical indicators are in bullish zones but not showing any upward momentum.

Monday, April 9, 2018

S&P 500 and FTSE 100 charts (Apr 06, 2018): attempts at bull rallies get 'Trump-ed' by bears

S&P 500 index chart pattern


The following comment was made in last week's post on the daily bar chart pattern of S&P 500: "Expect the falling 20 day and 50 day EMAs to provide resistance if the index tries to rally."

After falling and closing below its 200 day EMA for the second time in 6 trading sessions on Mon. Apr 2, the index attempted a rally during the next three days and moved above 2670 intra-day on Thu. Apr 5.

Resistance from the falling 20 day EMA prevented the rally from progressing further. More trade sanctions against China announced by Trump was just the excuse bears needed to sell.

On Fri. Apr 6, the index fell sharply below its 200 day EMA intra-day, but bounced up to close just above it  - losing about 1.4% on a weekly closing basis.

Daily technical indicators have corrected oversold conditions, but remain in bearish zones and are not showing any upward momentum. Bulls are desperately trying to defend the 200 day EMA. The volume bars show that their resolve is weakening.

Some technical experts have suggested that the index has formed a 'double bottom' reversal pattern, and the correction is over. Is it? Trading volumes suggest otherwise. 

Volumes during formation of the first bottom (at 2533 on Feb 9) were much higher than on Apr 2, when the index touched the second bottom of 2554. For a 'double bottom' to be technically valid, volumes during formation of the second bottom should be higher.

On longer term weekly chart (not shown), the index fell below its 50 week EMA intra-week, but managed to close above its 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are looking bearish and showing downward momentum.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 rallied past its falling 20 day EMA and the resistance level of 7100 during the week. Oversold weekly technical indicators may have triggered the rally.

Twin resistances from the falling 50 day EMA and the 7200 level brought the rally to a halt. Though the index closed below 7200, it gained 1.8% on a weekly closing basis. (At the time of writing this post, the index is struggling to cross above 7200.)

Daily MACD and RSI are showing upward momentum in bearish zones. Slow stochastic has entered its overbought zone, which is a bearish sign. Some consolidation between 7100 and 7200 is possible.

The 'death cross' (marked by blue circle) of the 50 day EMA below the 200 day EMA had technically confirmed a bear market. Bears will continue to 'sell on rise'.

On longer term weekly chart (not shown), the index closed above its 200 week EMA, but below its 20 week and 50 week EMAs. The 20 week EMA has crossed below the 50 week EMA after 20 months. Weekly technical indicators are correcting oversold conditions.