Sunday, September 8, 2019

Sensex, Nifty charts (Sep 06, 2019): consolidating inside support zones

During a holiday-shortened trading week, FIIs were net sellers of equity on all four days. Their total net selling was worth Rs 52.7 Billion. DIIs were net buyers of equity on all four trading days. Their total net buying was worth Rs 44.6 Billion, as per provisional figures.

The market started a pullback rally from Wed. Sep 4 expecting announcement of a third set of measures for boosting India's sagging economy. Instead, the Finance Minister promised to consider more measures after consultations.

After strong rallies, prices of gold and silver corrected sharply during Thu. and Fri. (Sep 5 and 6). With global stock markets on recovery paths, some more near-term downside in precious metals is possible.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex dropped sharply and lost 770 points on Tue. Sep 3 due to heavy selling by FIIs after the long week end. There was some recovery during the rest of the week, but the index closed below its three EMAs inside the 'support zone' (between 35900 and 37100).

Daily technical indicators are looking neutral to mildly bullish. MACD has merged with its rising signal line in bearish zone. ROC has crossed above its 10 day MA to enter bullish zone. RSI and Slow stochastic are just below their respective 50% levels.

The market was hoping for a third economic booster 'package' on Fri. Sep 6, but all it got was a promise. It won't be surprising if FIIs continue to vote with their feet. When an economy is steadily going downhill, throwing a few 'packages' in its path won't stop the slide. The gradient of the road itself needs to be changed.

That means bold reforms and immediate actions. The time for consultation and consideration is long over. More and more companies are laying-off employees and reducing production - making the economy decelerate even more. It is going to be a long and difficult road ahead. 

Small investors should concentrate on protecting capital - whatever may be left of it. Ignore the exhortations of those experts who want you to buy now.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty tested the lower edge of the 'support zone' (between 10700 and 11100) intra-week before bouncing up to close just below 10950. 

The index has been consolidating inside the 'support zone' for the past six weeks, and is trading below its 20 week and 50 week EMAs.

Weekly technical indicators are looking bearish and oversold. MACD is falling below its signal line in bearish zone. ROC and RSI are falling inside their respective oversold zones. Slow stochastic is moving sideways along the edge of its oversold zone. Expect some more consolidation or correction.

Nifty's TTM P/E has moved down to 26.91 - which remains above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has fallen sharply inside its oversold zone. Further index upside may be limited.

Bottomline? Sensex and Nifty charts are consolidating within long-term support zones. A low Q1 (Jun '19) GDP figure and the ongoing US-China trade spat have dampened bullish sentiment. Small investors should stay on the sidelines, but continue with their SIPs. 

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