A gearing ratio is a general classification describing a financial ratio that compares some form of owner equity (or capital) to funds borrowed by the company. Gearing is a measurement of a company's financial leverage, and the gearing ratio is one of the most popular methods of evaluating a company's financial fitness.
Though there are several variations, the most common ratio measures how much a company is funded by debt versus how much is financed by equity, often called the net gearing ratio. A high gearing ratio means the company has a larger proportion of debt versus equity. Conversely, a low gearing ratio means the company has a small proportion of debt versus equity.
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FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 18.3 Billion. DIIs were net sellers on Wed., but net buyers on Mon. & Tue. Their total net buying was worth Rs 0.53 Billion, as per provisional figures.
The number of companies that failed to meet earnings expectations during Q2 (Sep '18) outnumbered the outperformers by 2.5 times. As many as 20 Nifty companies saw EPS downgrades against 8 with EPS upgrades of 3% or more.
India Inc's foreign borrowings dipped nearly 66% to US $1.41 Billion in Oct '18 against US $4.09 Billion through ECBs and FCCBs in Oct '17.
The daily bar chart pattern of Nifty had partly filled the downward 'gap' (of 89 points formed on Oct 4) by rising above its three EMAs to touch an intra-day high of 10775 on Nov 19.
Bears attacked immediately. Nifty dropped below its three EMAs and touched an intra-day low of 10490 on Nov 26, but formed a 'reversal day' bar (lower low, higher close) and climbed up to test resistance from the 'gap' once again.
If FIIs continue to buy, expect the 'gap' to be completely filled. The down move may resume even if the 'gap' gets filled.
Note that the 'death cross' of the 50 day EMA below the 200 day EMA - which technically confirms a bear market - hasn't been a convincing one yet. That doesn't mean bears have given up.
Daily technical indicators are looking bullish. MACD is rising above its signal line in bullish zone. RSI has bounced up after briefly falling below its 50% level. Slow stochastic corrected overbought conditions and has bounced up after getting support from its 50% level.
Nifty's TTM P/E has moved up to 25.96, its highest level this month and much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) looks poised to re-enter its oversold zone after falling from it. Some consolidation or correction may follow.
Another quarter has come and gone, without the expected earnings growth from India Inc. Index valuation is already high. Small investors would do well to ignore bullish index projections of analysts.
Stick to stocks of fundamentally strong companies that generate a lot of cash, don't require regular capex and grow steadily rather than spectacularly.
WTI Crude Oil chart
Despite rumours of a production cut by Saudi Arabia, the daily bar chart pattern of WTI Crude Oil continued its steep correction from its Oct '18 top - touching a 52 week low of 50.10 on Nov 26, almost a 35% correction.
The 'death cross' of the 50 day EMA below the 200 day EMA (marked by grey oval) has technically confirmed a bear market. Bears have been using a 'sell on rise' strategy to devastating effect.
A production cut is expected when OPEC meets in Vienna next week amid worries over a US-China trade war, a supply glut and demand slowdown.
Daily technical indicators are looking quite oversold. MACD is falling below its signal line deep inside its oversold zone. RSI has remained inside its oversold zone since the beginning of Nov '18. Slow stochastic has remained inside its oversold zone for almost six weeks. All technical bounces are facing selling pressure.
On longer term weekly chart (not shown), oil's price closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking oversold. MACD is falling below its signal line in oversold zone. RSI is trying to emerge from its oversold zone. Slow stochastic is well inside its oversold zone, but has stopped falling.
Brent Crude Oil chart
The daily bar chart pattern of Brent Crude Oil has corrected 33% from its Oct 4 top, and plunged headlong into a bear market.
Oil's price touched a 52 week low of 58.40 on Nov 23, but bounced up to close above 60 on Nov 26. The imminent 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a bear market.
Daily technical indicators are looking quite oversold. MACD is falling below its signal line deep inside its oversold zone. RSI has remained inside its oversold zone for the past three weeks. Slow stochastic has remained inside its oversold zone for almost six weeks.
Bears have been using all technical bounces to sell, and may do so again. However, the price fall has been quite steep. Some consolidation around current levels - if not a rally - can be expected.
On longer term weekly chart (not shown), oil's price closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking bearish and oversold. MACD is below its signal line and has dropped to the edge of its oversold zone. RSI is trying to emerge from its oversold zone. Slow stochastic is well inside its oversold zone, but has stopped falling.
S&P 500 index chart pattern
In a trading week shortened by Thanksgiving holiday, the daily bar chart pattern of S&P 500 conceded further ground to bears. The index lost more than 100 points (3.8%) on a weekly closing basis.
Though the index closed well below its three EMAs in bear territory, technical confirmation of a bear market ('death cross' of the 50 day EMA below the 200 day EMA) is still awaited.
Note that Friday's curtailed trading formed a 'gravestone doji' candlestick pattern, which can lead to a pullback towards the plummeting 20 day EMA.
Daily technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. RSI is sliding down below its 50% level. Slow stochastic has dropped inside its oversold zone, and is showing negative divergence by touching a lower bottom. Expect some consolidation before the bears strike again.
On longer term weekly chart (not shown), the index closed below its 20 week and 50 week EMAs, but well above its 200 week EMA in a long-term bull market. Weekly technical indicators are in bearish zones and showing downward momentum. MACD is falling below its signal line. RSI and Stochastic are falling below their respective 50% levels.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 faced strong resistance from its falling 20 day EMA, and continued its downward slide during the week. The index closed just above 6950, but lost 61 points (0.9%) on a weekly closing basis.
All three EMAs are falling and the index is trading below them in a bear market. The British Prime Minister's BrExit deal with the EU can face a tough passage through the House of Commons. Till then, the market sentiments may remain bearish. (At the time of writing this post, the index has recovered around 70 points.)
Daily technical indicators are looking bearish. MACD is entangled with its signal line and is moving sideways in bearish zone. RSI is below its 50% level. Stochastic has bounced up from the edge of its oversold zone. Some consolidation or correction is likely.
On longer term weekly chart (not shown), the index closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are in bearish zones. MACD is falling below its signal line. RSI is below its 50% level. Stochastic has entered its oversold zone.
In a holiday-shortened trading week, FIIs were net sellers of equity on Tue. & Wed. (Nov 20 & 21), but net buyers on Mon. & Thu. (Nov 19 & 22). Their total net selling was worth Rs 8.6 Billion. DIIs were net buyers of equity on Wed. & Thu., but net sellers on Mon. & Tue. Their total net buying was worth Rs 3.0 Billion, as per provisional figures.
OECD and Moody's have projected India's GDP growth to moderate to 7.3% in 2019, whereas RBI expects FY 2018-19 GDP growth at 7.4%. The recent decline in oil prices may reduce the Current Account Deficit (CAD) to 2.6% of GDP against the earlier expectation of 2.8%.
With China's Belt and Road initiative facing a pushback, the UAE, Japan, France, Germany, Italy and UK are in talks with India to launch joint projects in Africa. Morocco has also expressed interest for joint projects in West Africa.
BSE Sensex index chart pattern
Note the following comments from last week's post on the daily bar chart pattern of Sensex: "...the index appears to be forming a 'rising wedge' pattern from which the likely breakout is downwards...the index needs to cross above the 91 points downward 'gap' formed on Oct 4, and the 36000 level - both of which can act as resistances."
What had looked like a bearish 'rising wedge' evolved into an equally bearish 'flag' pattern - from which the expected downward breakout occurred on Thu. Nov 22.
Before that, the index rose to touch an intra-day high of 35819 on Mon. Nov 19 - only to close 44 points lower after facing strong resistance from the lower edge of the 91 points downward 'gap' formed on Oct 4.
That was the trigger bears were waiting for. Three straight days of lower closes dropped the index below its three EMAs back into bear territory. The close below the 'flag' hasn't been a convincing one - leaving the door open for a pullback. Bears may use it to sell again.
Daily technical indicators are turning bearish. MACD has formed a small 'rounding top' pattern above its signal line, and is poised to re-enter bearish zone. RSI and Slow stochastic have dropped down from their respective overbought zones. ROC has entered bearish zone.
Upcoming state elections and possible setback for the ruling BJP in one or two states is keeping the stock market on tenterhooks. Election results have little long-term effect on the market. Expect the fear-factor to recede following results announcement on Dec 11.
NSE Nifty index chart pattern
After three straight weeks of gains, the weekly bar chart pattern of Nifty attempted to cross above its 20 week EMA but failed. The index formed a weekly 'reversal' bar (higher high, lower close) and dropped below its 50 week EMA.
By touching a high of 10775 during the week, the index retraced about 44% of its 1755 points correction from its Aug '18 top (11760) to its Oct '18 low (10005) - which fell 105 points short of the Fibonacci 50% retracement level of 10880.
Nifty closed well above its 200 week EMA in a long-term bull market. However, the corrective move from its Aug '18 top does not appear to be over. Another leg of the down move can take the index towards 9800.
Weekly technical indicators are in bearish zones, and showing slight downward momentum. MACD is sliding down below its falling signal line in bearish zone. ROC is below its falling 10 week MA inside oversold zone. RSI is moving down towards its oversold zone. Slow stochastic has started to move down after emerging from its oversold zone.
After touching a high of 25.88 on Mon. Nov 19, Nifty's TTM P/E has drifted down to 25.43, which remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone, and can limit near-term index downside.
Bottomline? FII buying had triggered counter-trend rallies on Sensex and Nifty charts from their Oct '18 lows. Earnings growth of India Inc. belied expectations - capping near-term index upside. Now state elections are causing some jitters. Better to stay on the sidelines, unless you can unearth a really compelling reason to participate.
Walter Schloss was one of the most successful investors of all time, but outside a small portion of the value investing community, no one knows the name. Mr. Schloss studied under Benjamin Graham at Columbia University and eventually went to work for Graham at the Graham Newman Partnership.
In 1955, Schloss struck out on his own and compiled one of the best track records in the history of investing. Over a 50-year span, he earned gross returns averaging 20% annually. His method emphasized buying cheap stocks with solid financials and holding them until they were considered overvalued. Mr. Schloss emphasized price-to-book value (P/BV) as the best measure of a corporation's value and preferred buying stocks that traded below book value.
In 1994, Walter Schloss sat down and outlined his thoughts on making money in markets to serve as a guide to newer investors or those without in-depth knowledge of the value investing process. The result was one typed page listing the 16 factors needed to make money in the stock market.
Read about the 16 factors here.
Gold chart pattern
The daily bar chart pattern of Gold faced strong resistance from the 'Support/Resistance zone' between 1230 & 1240, and dropped sharply below its 20 day and 50 day EMAs.
After touching an intra-day low of 1196 on Tue. Nov 13, gold's price has rallied above its 20 day and 50 day EMAs. Note the sliding volumes, hinting that the rally may soon run out of steam.
Incidentally, gold's price is almost a mirror-image of the US Dollar index, which spiked to 97.50 on Nov 12 but dropped to 96 on Nov 19 - triggering the rally in gold's price.
Daily technical indicators are looking neutral to bullish. MACD is trying to cross above its '0' line after falling briefly below it. RSI has just moved above its 50% level after falling below it. Slow stochastic has bounced up smartly from its oversold zone and has moved above its 50% level.
Gold's price is trading below its sliding 200 day EMA in a bear market. Expect it to face resistance from the 'Support/Resistance zone' once again.
On longer term weekly chart (not shown), gold’s price closed just below its 20 week EMA, and well below its 50 week and 200 week EMAs in long-term bear territory. Weekly technical indicators are looking slightly bearish. MACD is rising above its signal line in bearish zone. RSI dropped down after facing resistance from its 50% level, but is trying to move up. Slow stochastic has dropped sharply from its overbought zone.
Silver chart pattern
The daily bar chart pattern of Silver touched a 52 week low of 13.86 on Wed. Nov 14, but formed a 'reversal day' bar (lower low, higher close) that triggered a sharp rally that is facing resistance from the 20 day EMA.
Volumes have been sliding during the rally. That means the rally may not last much longer. Silver's price is trading below its 50 day EMA and well below its falling 200 day EMA in a bear market.
Daily technical indicators are looking neutral to bearish. MACD is trying to cross above its falling signal line in bearish zone. RSI is at its neutral zone. Slow stochastic has bounced up from its oversold zone and is rising towards its 50% level. Expect bears to 'sell on rise' anytime.
On longer term weekly chart (not shown), silver’s price closed well below its three weekly EMAs in a long-term bear market. Weekly technical indicators are in their respective bearish zones. MACD is moving sideways just above its signal line. RSI has bounced up from the edge of its oversold zone. Slow stochastic is below its 50% level and is not showing any upward momentum.
S&P 500 index chart pattern
The daily bar chart pattern of S&P 500 shows how bears pounced on weakened bulls. The index dropped below its three EMAs into bear territory, and touched a low of 2671 on Thu. Nov 15 before bouncing up to close at 2736.
The index lost 1.6% on a weekly closing basis. Its repeated failures to regain bull territory may be a warning of a deeper correction. The falling 50 day EMA is only 20 points above the 200 day EMA. The 'death cross', which technically confirms a bear market, may follow soon.
Daily technical indicators are still giving conflicting signals. MACD has dropped to seek support from its rising signal line in bearish zone. RSI has fallen below its 50% level after crossing above it. Stochastic has dropped from its overbought zone and is just above its 50% level. Some more correction or consolidation is likely.
On longer term weekly chart (not shown), the index closed below its 20 week EMA but just above its 50 week EMA and well above its 200 week EMA in a long-term bull market. Weekly technical indicators have turned bearish. MACD is falling below its signal line in bullish zone, and is poised to enter bearish zone. RSI and Stochastic have dropped below their respective 50% levels.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 consolidated sideways with a downward bias during the week. The index touched a low of 6969 on Fri. Nov 16, but bounced up to close at 7014 - losing 1.3% on a weekly closing basis.
All three EMAs are falling and the index is trading below them in a bear market. The British Prime Minister will try to convince business leaders today about the BrExit deal that she has worked out. (The index has risen about 25 points at the time of writing this post in anticipation of a favourable outcome.)
Daily technical indicators are looking bearish. MACD is moving sideways above its rising signal line in bearish zone. RSI is falling below its 50% level. Stochastic has dropped to the edge of its oversold zone. Some more correction or consolidation is possible.
On longer term weekly chart (not shown), the index closed well below its 20 week and 50 week EMAs and just below its 200 week EMA in long-term bear territory. Weekly technical indicators are in bearish zones. MACD is falling below its signal line. RSI is below its 50% level. Stochastic is hovering above the edge of its oversold zone.
After 7 straight months of being bears, FIIs have turned bulls in Nov '18. They were net sellers of equity on Tue. Nov 13, but net buyers on the other four days. Their total net buying was worth Rs 35 Billion.
DIIs have turned bears for the first time since Mar '17. They were net buyers of equity on Tue., but net sellers on the other four days. Their total net selling was worth Rs 15.5 Billion, as per provisional figures.
India's trade deficit widened to US $17.1 Billion in Oct '18 compared to US $14.6 Billion in Oct '17. Exports rose 17.9% to US $27 Billion due to low base effect. Imports rose 17.6% to US $44.1 Billion.
During Apr-Oct '18, exports grew 13.3% to US $191 Billion. Imports grew 16.4% to US $302.5 Billion, leaving a trade deficit of US $111.5 Billion.
BSE Sensex index chart pattern
Thanks to FII buying, the daily bar chart pattern of Sensex rose above its 200 day and 50 day EMAs and closed above all three EMAs for the first time in more than two months. The 'death cross' - of the 50 day EMA below the 200 day EMA that technically confirms a bear market - has been averted for the time being.
Bulls should hold off on their celebrations. Since the beginning of the month, the index appears to be forming a 'rising wedge' pattern from which the likely breakout is downwards. There are other technical hurdles as well.
The 38.2% Fibonacci retracement level of the 5700 points index fall from its Aug 29 top to its Oct 26 low is 35470. By touching an intra-day high of 35546 and closing at 35457, the index has more or less achieved the retracement.
The 50% Fibonacci retracement level of the fall is at 36140. To get there, the index needs to cross above the 91 points downward 'gap' formed on Oct 4, and the 36000 level - both of which can act as resistances.
As long as the index remains below 36140, bears will have the advantage. Bulls will regain control of the chart only after a convincing move above 36140.
Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line, and is poised to enter bullish zone. RSI and Slow stochastic are well inside their respective overbought zones. ROC has started correcting from its overbought zone, and showing negative divergence by touching a lower top.
Fall in oil prices and consequent strengthening of the Rupee against the US Dollar has encouraged FIIs to resume buying in equities after heavy selling in Oct '18. If they continue buying, near-term technical headwinds may not be of much consequence.
However, the index has already gained more than 2250 points (~7%) from its Oct 26th low. As Falstaff said: The better part of valour is discretion.
NSE Nifty index chart pattern
For the third straight week, the bar chart pattern of Nifty closed higher. More importantly for bulls, it closed above its 50 week EMA after 7 weeks. By closing at 10682, the index has retraced 38.2% of its 1755 points fall from its Aug '18 top to its Oct '18 low.
The next target for bulls will be 10880, which is the 50% Fibonacci retracement level. To get there, Nifty needs to overcome the likely resistance from its 20 week EMA. A convincing move above 10880 will put bulls back in control of the chart. Expect bears to fight to prevent that from happening.
Weekly technical indicators are in bearish zones, and not showing much upward momentum. MACD is moving sideways below its signal line in bearish zone. ROC is trying to emerge from its oversold zone. RSI is moving sideways above its oversold zone. Slow stochastic has emerged from its oversold zone, and showing some upward momentum.
Nifty's TTM P/E has moved up to 25.69, its highest level this month and well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising in neutral zone, and can limit near-term index upside.
Bottomline? FII buying has triggered smart rallies on Sensex and Nifty charts from their Oct '18 lows. Earnings growth of India Inc. have belied expectations once again. Near-term index upside may be limited - unless FIIs step up their buying.
Volatility in the stock market can be counter-intuitive. Bull markets aren’t typically filled with huge up days. Instead, rising markets tend to experience a slow and methodical rise higher.
The best up days are usually seen in the same market environments as the worst down days, which occur during down-trending, volatile markets.
...loss aversion is a big reason why investors tend to make more emotionally-charged decisions when stocks are falling, which causes both panic selling and panic buying during a market downtrend.
Read more at:
https://www.investopedia.com/news/training-your-mind-volatile-markets/
In a reversal of roles, FIIs were net buyers of equity on Mon. & Wed. (Nov 12 & 14), but net sellers of equity on Tue. Nov 13. Their total net buying was worth Rs 6.1 Billion. DIIs were net sellers on Mon. & Wed., but net buyers on Tue. Their total net selling was worth Rs 10.1 Billion, as per provisional figures.
India's CPI inflation eased to a 13 months low of 3.31% in Oct '18 on the back of lower food prices, from a downward-revised 3.7% in Sep '18. However, WPI inflation rose to a 4 months high of 5.28% in Oct '18 due to higher petrol and diesel prices, from 5.13% in Sep '18.
India's IIP grew marginally at 4.5% in Sep '18 against 4.3% in Aug '18, indicating that there has not been any significant acceleration in factory output despite waning of the impact of demonetisation and GST.
During the past 8 trading sessions, the daily bar chart pattern of Nifty has been consolidating sideways within a 210 points range - as FIIs turned net buyers of equity after heavy selling in Oct '18 while DIIs turned net sellers.
Note that the index has formed a small 'broadening top' pattern that has bearish implications. Today's trading resulted in formation of a 'reversal day' pattern (higher high, slightly lower close). The index may be heading downwards soon.
On Oct 4 '18, Nifty had dropped below its 200 day EMA with a 'downward gap'. It has remained below the 'gap' and its 200 day EMA in bear territory since then.
Bulls have fought hard to prevent the 'death cross' of the 50 day EMA below the 200 day EMA so far. But the longer the index trades below its 200 day EMA, the greater is the chance that it will fall below its Oct 26 low of 10005.
Daily technical indicators are giving conflicting signals, which is often the case during periods of consolidation. MACD is rising above its signal line in bearish zone. RSI is meandering sideways in neutral zone. Slow stochastic has started to correct inside its overbought zone.
Nifty's TTM P/E has slipped a bit to 25.43, which remains higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has bounced up sharply from the edge of its overbought zone, hinting at near-term downside.
Q2 (Sep '18) earnings growth of India Inc. has belied expectations. Without the fuel of earnings, the index engine will continue to sputter and stall.
WTI Crude Oil chart
The following remarks were made in the previous post on the daily bar chart pattern of WTI Crude Oil: "...oil's price has been consolidating within a bearish 'flag' pattern. Some more consolidation/correction is likely."
The consolidation within the 'flag' (shaded on chart) didn't last long. A downward breakout on Oct 30 led to a sharp correction and a close below the 60 level for the first time in 8 months.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line in oversold zone. RSI is well inside its oversold zone. Slow stochastic has remained inside its oversold zone for a month.
The 20 day EMA has crossed below the 200 day EMA and is falling sharply. The 'death cross' of the 50 day EMA below the 200 day EMA seems imminent. That will technically confirm a bear market.
Saudi Arabia has signalled a production cut from Dec '18. Expect a near-term floor to the plummeting price of oil.
On longer term weekly chart (not shown), oil's price closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking quite bearish. MACD is falling below its signal line in bearish zone. RSI is falling towards its oversold zone. Stochastic has entered its oversold zone.
Brent Crude Oil chart
The following remarks were made in the previous post on the daily bar chart pattern of Brent Crude Oil: "On Oct 29, oil's price formed a 'reversal day' bar (higher high, lower close) that can lead to a correction towards the rising 200 day EMA."
The correction received only token support from the 200 day EMA. On Nov 1, oil's price formed a 'downward gap' and dropped below its 200 day EMA. A pullback attempt on Nov 5 was used by bears to sell. Oil's price closed just above 70.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line in oversold zone. RSI is well inside its oversold zone. Stochastic briefly emerged from its oversold zone, only to drop back inside it.
Oil's price is trading below its three EMAs in bear territory. The 20 day EMA is about to cross below the 200 day EMA. The 'death cross' of the 50 day EMA below the 200 day EMA - which will technically confirm a bear market - is awaited.
On longer term weekly chart (not shown), oil's price dropped below its 20 week and 50 week EMAs but manged to close just above its 200 week EMA in long-term bull territory. Weekly technical indicators are showing downward momentum. MACD is falling below its signal line and looks ready to enter bearish zone. RSI is falling below its 50% level. Stochastic has entered its oversold zone.
S&P 500 index chart pattern
The daily bar chart pattern of S&P 500 climbed above its three EMAs back into bull territory on Wed. Nov 7. Bear selling dropped the index to seek support from its entangled 20 day and 200 day EMAs.
The index bounced up to close just above 2780 with a gain of 2.1% on a weekly closing basis. However, bearish hopes have been kept alive as the index closed below its 50 day EMA.
Daily technical indicators are giving conflicting signals. MACD is rising above its signal line in bearish zone. RSI is falling towards its 50% level after crossing above it. Stochastic is about to fall from its overbought zone. Expect some consolidation or correction.
On longer term weekly chart (not shown), the index closed just below its 20 week EMA but above its 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are turning bullish. MACD is falling below its signal line in bullish zone, but its downward momentum has reduced. RSI is facing resistance from its 50% level. Stochastic has crossed above its 50% level.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 consolidated sideways during the week as it oscillated about its 20 day EMA. The index managed to close just above its 20 day EMA, eking out a weekly gain of 11 points.
However, by closing below its 50 day and 200 day EMAs, the index remained in bear territory. BrExit tension appears to be hanging heavy over the market.
Daily technical indicators are looking slightly bearish. MACD is rising above its signal line in bearish zone, but its upward momentum is reducing. RSI faced resistance from its 50% level and has turned downwards. Stochastic tried to re-enter its overbought zone, but has dropped down. Some more consolidation or correction is likely.
On longer term weekly chart (not shown), the index closed below its 20 week and 50 week EMAs but above its 200 week EMA in long-term bull territory. Weekly technical indicators are in bearish zones. MACD is falling below its signal line bit its downward momentum has reduced. RSI and Stochastic have emerged from their respective oversold zones, but are not showing much upward momentum.
Trading activity was muted in a holiday-curtailed trading week. FIIs were net sellers of equity on Tue. Nov 6, but net buyers on the other three days. Their total net buying was worth Rs 1.58 Billion. DIIs were net buyers of equity on Tue. & Wed., but net sellers on Mon. & Fri. Nov 9. Their total net selling was worth Rs 8.1 Billion, as per provisional figures.
Nikkei India's Manufacturing PMI rose to 53.1 in Oct '18 from 52.2 in Sep '18. Nikkei India's Services PMI rose to 52.2 in Oct '18 from 50.9 in Sep '18. The Composite (Manufacturing + Services) PMI rose to 53 in Oct '18 from 51.6 in Sep '18. (A number >50 indicates expansion.)
The combined profits of about 940 listed companies are up just about 3% YoY, against 12.5% YoY in the June '18 quarter. Higher raw material and borrowing costs are two factors responsible for slower overall earnings growth of India Inc. during the Sep '18 quarter - despite a low base.
BSE Sensex index chart pattern
The following comments from last week's post on the daily bar chart pattern of Sensex may be worth noting:
"The index corrected about 5700 points (14.6%) from its Aug 29 top of 38990 to its Oct 26 low of 33292. A 38.2% Fibonacci retracement of the fall will take the index to 35470 - which is in the zone between the current levels of the 200 day EMA and the 50 day EMA. Expect bears to start selling to protect this zone."
The index rose above its 200 day EMA to touch an intra-day high of 35302 on Nov 7, which was quite near the 38.2% Fibonacci retracement level of 35470. On the next trading day (Nov 9), the index again crossed above its 200 day EMA to touch a slightly lower intra-day high of 35287.
On both days, the index failed to close above its 200 day EMA. Good news for bulls is that the 'diwali' rally prevented 'death cross' of the 50 day EMA below the 200 day EMA (which would have technically confirmed a bear market). The reprieve may be temporary.
Daily technical indicators are looking bullish, and showing upward momentum. MACD is rising above its signal line in bearish zone. RSI is rising above its 50% level in bullish zone. ROC and Slow stochastic have entered their respective overbought zones, and can trigger a down move towards the Fibonacci support zone (between 33934 and 32372).
Falling oil prices, a pause in FII selling in equities and consequent strengthening of the Rupee against the US Dollar created a conducive environment for the 'diwali' rally.
However, Q2 (Sep '18) results have been a damp squib. Without the expected boost in earnings, Sensex is unlikely to touch new highs any time soon. Incidentally, the Dollex 30 index (Sensex measured in US Dollars) is in a bear market. No wonder FIIs resorted to huge selling in Oct '18.
NSE Nifty index chart pattern
For the second straight week, the bar chart pattern of Nifty faced strong resistance from its 50 week EMA. Despite a 32 points gain on a weekly closing basis, the index has closed below its 20 week and 50 week EMAs for six consecutive weeks.
Good news for bulls is that the index closed well above its 200 week EMA in a long-term bull market. Bad news is that bears are unlikely to weaken their stranglehold on the chart in the near term. That means, some more downside is possible.
Weekly technical indicators are in bearish zones, and not showing any upward momentum. MACD is still falling below its signal line in bearish zone, though its downward momentum has reduced. ROC remains inside its oversold zone. RSI has bounced up weakly from the edge of its oversold zone. Slow stochastic is trying to emerge from its oversold zone.
Nifty's TTM P/E has inched up to 25.46, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has tumbled to the edge of its overbought zone, suggesting limited near-term index upside. Looks like the 'diwali' rally has run its course.
Bottomline? 'Diwali' rallies on Sensex and Nifty charts failed to overcome strong resistances from long-term moving averages. Earnings growth of India Inc. have belied expectations once again. Another leg downwards appear to be the most likely near-term directions for both indices.
