Sensex, Nifty charts (Dec 18, 2020): rising higher but showing some signs of fatigue

FIIs continued with their strong buying during the week. They were net buyers of equity worth Rs 118.06 Billion. DIIs tried their best to match them. They were net sellers of equity worth Rs 110.25 Billion. Sensex and Nifty both gained around 1.8% on a weekly closing basis.

India's CPI-based retail inflation eased marginally to 6.93% in Nov '20 from a six and a half year high of 7.61% in Oct '20 - thanks to easing of vegetable prices. WPI-based wholesale inflation rose for the fourth consecutive month to a nine months' high of 1.55%. 

In Nov '20, India's exports declined 8.74% to US $23.52 Billion while imports declined 13.32% to $33.39 Billion. The trade deficit hit a 10 months' high of $9.87 Billion. During Apr-Nov '20, exports dropped 17.76% to $173.66 Billion while imports dropped 33.55% to $215.69 Billion - leaving a trade deficit of $42 Billion.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex again touched new intra-day (47026) and closing (46961) highs during the week. FIIs continued with their strong buying while ignoring stretched index valuation. A falling US Dollar index may have motivated them to do so.

Sensex is trading well above its three rising EMAs in a long-term bull market. It has been rising within a nine months long upward-sloping channel, and is testing resistance from the upper edge of the trading channel. There is a possibility of some correction or consolidation prior to the Christmas holidays.

Daily technical indicators are in bullish zones, and looking overbought. MACD is moving sideways after merging with its signal line. ROC is moving sideways along with its 10 day MA. RSI is rising higher inside its overbought zone. Slow stochastic is rising gradually inside its overbought zone.

The farmers' agitation is being allowed to fester by an adamant government. Instead of solving the problem, farmers are being vilified and forced to hunker down in the open in extremely cold weather. The negative effects are beginning to be felt in industry, food prices and movement of goods.

Macroeconomic fundamentals have taken a back seat as the index is rising on the back of a flood of FII money. Enjoy the bull ride while it lasts, but maintain trailing stop-losses to protect profits.  

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose for the seventh straight week to close at a new high of 13760. A falling US Dollar index has resulted in strong buying by FIIs - pushing the index higher into extremely stretched valuation zone. 

The index has been rising within an upward-sloping channel for almost 9 months, and is trading well above its three rising weekly EMAs in a long-term bull market. FII buying has sustained the long rally, but there is possibility of some profit booking before Christmas holidays.

Weekly technical indicators are inside their respective overbought zones. MACD is rising above its signal line. ROC has dipped towards its rising 10 week MA. RSI and Slow stochastic are rising slowly. 

Nifty's TTM P/E has touched a new high of 37.84 - which is far above its long-term average and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) has climbed sharply from its overbought zone, and can trigger some near-term index consolidation or correction.

 

Bottomline? Sensex and Nifty charts are rising to newer highs on the back of strong buying by FIIs. Year-end profit booking by foreign fund houses is a distinct possibility. This is not a good time to look for new stock ideas. Hold existing positions with trailing stop-losses.

Sensex, Nifty charts (Sep 18, 2020): consolidation continues after sharp rallies

FIIs were net sellers of equity on Thu. Sep 17, but were net buyers during the other days of the week. Their total net buying was worth Rs 16.89 Billion. DIIs were net sellers during all five days. Their total net selling was worth Rs 23.97 Billion.

Total vehicle registrations at Regional Transport Offices during Aug '20 fell 26.81% YoY. While tractor registrations grew 27.8%, PV, 2W, CV and 3W registrations fell 7.1%, 28.7%, 57.4% and 69.5% respectively.

CPI based retail inflation slipped a bit to 6.69% YoY in Aug '20 from 6.73% in Jul '20. It was at 3.28% in Aug '19. WPI based wholesale inflation turned positive in Aug '20 for the first time since Mar '20, rising to 0.16% YoY in Aug '20 from -0.58% in Jul '20.

Exports fell 12.7% YoY in Aug '20 while imports were down 26%, resulting in a lower trade deficit of US $6.77 Billion against $13.86 Billion a year ago.

BSE Sensex index chart pattern

During the week, the daily bar chart pattern of Sensex consolidated sideways while trading above its three daily EMAs in a bull market. However, bears put up a good fight at the 335 points downward 'gap' (formed on Feb 28) - continuing to frustrate efforts by bulls to push the index higher for the third straight week.

A foray inside the 'gap' zone on Wed. Sep 16 could not be sustained despite buying by FIIs. On a weekly basis, the index closed flat. The hurdle of the 'gap' will need to be overcome before bulls can resume control of the chart. 

Daily technical indicators are looking neutral to bullish. MACD is moving sideways after merging with its signal line in bullish zone. ROC has moved above its 10 day MA in neutral zone. RSI has just crossed above its 50% level. Slow stochastic is rising above its 50% level.

US stock indices closed lower for the third straight week, as a tech-led sell-off intensified. If current restrictions on short selling are not extended beyond Sep 24, expect selling to intensify in Indian stock indices as well.

After 50% gains from its Mar '20 low, do not expect Sensex to surge much higher. Stocks like RIL, which has gained more than 100% since its Mar '20 low, HDFC twins, HUL fuelled the index rally. 

Now midcap and smallcap stocks are coming to the forefront and several IPOs are in the pipeline. Small investors should be extra cautious not to fall into the trap of making easy money with little effort. 

Wealth building in the stock market requires knowledge, discipline, patience and a lot of time for the magic of compounding to take effect. Quick profits are here today, gone tomorrow.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty had bounced up after dropping inside the 'support-resistance zone' between 11000-11250 in the previous week. Despite FII buying, the index failed to make much upward progress - gaining about 40 points (0.35%) on a weekly closing basis.

Convincing breach of an up trend line is often a sign of trend reversal. But bears are still on the back foot, since all three weekly EMAs are moving up and the index is trading above them in long-term bull territory. 

Weekly technical indicators are in bullish zones but not showing any upward momentum. MACD is above its signal line inside its overbought zone. RSI is moving sideways above its 50% level. Slow stochastic is sliding down towards the edge of its overbought zone. 

After touching a new high of 33.03 on Tue. Sep 15, Nifty's TTM P/E has moved down a bit to 32.98, which is well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped sharply from its oversold zone. Some more near-term index consolidation or correction is possible.
 
Bottomline? After breaching 5 months long up trend lines on Sensex and Nifty charts, both indices have been consolidating near resistance zones. Some more consolidation or correction is likely. Stay on the sidelines. Wait for better entry opportunities.

Sensex, Nifty charts (Aug 14, 2020): bears keep bulls on a leash

FIIs were net buyers of equity on all five trading days. Their total net buying was worth Rs 21.30 Billion. DIIs were net sellers of equity on all five trading days. Their total net selling was worth Rs 44.21 Billion.

India's CPI-based retail inflation rose to 6.93% in Jul '20 from 6.23% in Jun '20. CPI remained above 6% for the fourth straight month. Food inflation was 9.62%, thanks to supply disruptions. WPI-based wholesale inflation was -0.58% in Jul '20 against -1.81% in Jun '20.

After a US $790 Million trade surplus in Jun '20, India's trade deficit was US $4.83 Billion in Jul '20. Exports were down 10.21% to $23.64 Billion, while imports were down 28.4% to $28.47 Billion. Trade deficit was $13.43 Billion in Jul '19.

BSE Sensex index chart pattern

Note the following comment from last week's post on the daily bar chart pattern of Sensex: "Sensex needs to convincingly move above its Jul. 29th top of 38617 for the bullish pattern of 'higher tops, higher bottoms' to continue."

Despite FII buying throughout the week, the index tested but failed to move above 38617. On Fri. Aug 14, the index formed a 'reversal day' bar (higher high, lower close) and dropped to close near the lower edge of the 640 points downward 'gap' formed back on Mar 6th.

Should bulls be worried? Not yet. Though the index slipped below its 20 day EMA intra-day on Fri., it received support from the (blue) up trend line and bounced up. Remember that a trend line gets stronger with each successful test (unlike support/resistance levels, which get weakened with frequent tests).

The 'golden cross' (marked by light blue circle) of the 50 day EMA above the 200 day EMA is a technical confirmation of a return to a bull market. Does that mean bears have been vanquished, and all dips are buying opportunities?

Not quite. Sensex may be forming a small 'double top' reversal pattern that will be technically confirmed on a fall below the Aug 3rd low of 36911. In case the index does confirm the 'double top', the downward target will be 35250 (which just happens to fall inside the downward 'gap' formed back on Mar 12th).

Daily technical indicators are looking bullish to neutral. MACD is moving sideways after merging with its signal line in bullish zone. ROC has merged with its 10 day MA, and is moving sideways along its '0' line. RSI has dropped to its 50% level. Slow stochastic has dropped from its overbought zone after re-entering it.

Why are FIIs still buying after the index has already gained more than 45% from its Mar '20 low? One of the reasons may be the US Dollar index, which had peaked at 104 on Mar 23rd but is now languishing at 93. DIIs are clearly in profit-booking mode, and they have often outsmarted FIIs at or near market tops. So, caution is advised for those holding long positions.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs in long-term bull territory for the 6th straight week, but again failed to close above the 'support-resistance' zone between 11000-11250. Bear resistance forced a fourth weekly close inside the 'support-resistance' zone.

The 20 week and 50 week EMAs are moving up after forming bullish 'rounding bottom' patterns. The 200 week EMA has also started to move up. Bulls remain on top. However, failure of the index to close above the 'support-resistance' zone has kept bears in the game. A correction down to the 200 week EMA (at 10291) is possible.

Weekly technical indicators are in bullish zones. MACD is rising above its signal line and is well inside bullish zone. RSI is moving sideways above its 50% level. Slow stochastic is sliding down inside its overbought zone. 

Nifty's TTM P/E touched a new lifetime high of 31.42 on Thu. Aug 13 before slipping a bit to 31.09, which remains deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) dropped to the edge of its overbought zone, only to bounce up a little. Some more correction or consolidation is likely.
 
Bottomline? Counter-trend rallies on Sensex and Nifty charts have failed to move above resistance zones after re-entering bull territories. Bulls still have the advantage, but bears have kept them on a leash during the past four weeks. Time to book some profits.

Sensex, Nifty charts (Mar 20, 2020): in strong bear grips

FIIs were net sellers of equity on all five trading days. Their total net selling was worth a whopping Rs 209.09 Billion. DIIs were net buyers of equity on all five days. Their total net buying was worth Rs 164.72 Billion, as per provisional figures.

India's WPI-based inflation softened to 2.26% in Feb '20 from 3.1% in Jan '20 and 2.93% in Feb '19 - thanks to cheaper food and vegetables prices. 

On Friday, Mar 20, SEBI announced a few steps to ease market volatility by limiting short positions in F&O segment, increasing margins on non-F&O stocks and revising marketwide positions limits for stock derivative contracts. (These measures will come into effect from Mon. Mar 23.)

BSE Sensex index chart pattern

Note the following comment from last week's post on the daily bar chart pattern of Sensex:

"Since 'panic bottoms' seldom hold, expect Friday's intra-day low of 29389 will be tested and breached."

It came as no surprise that the index closed well below 29389 on Wed. Mar 18, and dropped further to touch a new low of 26714 on Thu. Mar 19. 

Friday's sharp rally on short-covering and some value buying was typical of bear market rallies, and should be treated as a 'dead-cat bounce'. That means, if the index tries to rally higher, expect bears to 'sell on rise'.

Sensex appears to be correcting the 11 year gain of some 34000 odd points from the Mar '09 low to the Jan '20 top. A 50% Fibonacci retracement will drop the index to about 25100. Thursday's low came within 1600 points of this critical level.

Daily technical indicators are looking bearish and oversold. MACD is falling deeper inside its oversold zone. RSI is trying to emerge from its oversold zone. Slow stochastic is oscillating about the edge of its oversold zone. Remember that a stock market can remain oversold for long periods during a bear phase. 

The Corona virus may have been contained in China, but is spreading rapidly in Europe, USA, Australia. India will not escape its tentacles easily - whether you clap your hands on Sunday or not. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty touched a new 3 year low of 7833, and closed well below its 200 week EMA for the second straight week. The 20 week EMA has crossed below its 50 week EMA for the first time in 3 years, and both weekly EMAs are falling towards the 200 week EMA.

The long-term bullish structure of the chart has been dismantled by bears. FIIs have pulled out more than Rs 510 Billion from their equity holdings during the past three weeks, and may continue with their exit strategy.

Note that the past two weeks' steep correction, which has been blamed on the Corona virus by experts, was preceded by three weeks of correction that had dropped Nifty close to its 200 week EMA. The virus only exacerbated the already bearish mood. 

Weekly technical indicators are looking bearish and oversold. MACD is falling inside its oversold zone. RSI is also falling inside its oversold zone. Slow stochastic has bounced up a bit from the edge of its oversold zone. Friday's short-covering bounce may not last long before bears resume their selling. 

Nifty's TTM P/E has moved down further to 19.72, but remains above its long-term average. The breadth indicator NSE TRIN (not shown) has slipped down from its oversold zone, hinting at some near-term index pullback or consolidation.

Bottomline? Sensex and Nifty charts have closed well below their respective 200 week EMAs for the second straight week - signalling the end of long-term bull markets. A rapidly spreading corona virus has compounded bearish sentiment about weak economic growth and fiasco in the financial sector. Small investors should stay on the sidelines and curb any urge for bottom-fishing.

Sensex, Nifty charts (Feb 14, 2020): consolidating below lifetime highs

FIIs were net buyers of equity on Wed. and Thu. (Feb 12 and 13) but net sellers on Mon., Tue. and Fri. (Feb 10, 11 and 14). Their total net buying was worth Rs 0.11 Billion. DIIs were net sellers of equity on Mon. and Thu., but net buyers on the other three days of the week. Their total net selling was worth Rs 7.93 Billion, as per provisional figures.

India's CPI-based retail inflation moved up to 7.59% in Jan '20 from 7.35% in Dec '19. WPI-based wholesale inflation also rose to 3.1% in Jan '20 from 2.59% in Dec '19. The Index of Industrial Production (IIP) contracted 0.3% in Dec '19 against a growth of 1.8% in Nov '19. 

Exports fell 1.66% to US $25.97 Billion while imports slipped 0.75% to $41.14 Billion in Jan '20. The trade deficit widened to a 7 months high of $15.17 Billion. A combination of rising inflation, widening trade deficit and contracting production does not augur well for India's economic growth.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex closed above its three EMAs in long-term bull territory, eking out a gain of 115 points on a weekly closing basis. The index is trading just 1000 odd points below its lifetime high of 42274 touched in Jan '20.

Daily technical indicators are looking neutral to bearish. MACD has crossed above its signal line and moved up to the '0' line. RSI is falling towards its 50% level. (Since Nov '19, MACD and RSI have been showing negative divergences by forming bearish patterns of 'lower tops, lower bottoms'.) Slow stochastic has dropped down from its overbought zone. 

Declining stocks were outnumbering advancing stocks during the week gone by, making the current rally unsustainable for long. Heavyweight stocks like RIL, HUL are keeping the index afloat as the broader market continues to slide.

[There are signs of a reversal pattern formation in progress at the index top. It could be a 'broadening top' or a 'diamond'. If either of the patterns play out, there could be a sharp index correction below the 200 day EMA.]

Q3 (Dec '19) results season is almost over. Results have been more or less as per lower market expectations, with a few positive earnings surprises on the back of corporate tax rate cuts.

It is not an appropriate time for bargain hunting when an index is trading near a lifetime high. For long-term investors, waiting patiently for lower levels to add is often more rewarding. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs, but formed a 'doji' bar that indicates indecision among bulls and bears. A bullish pattern of 'higher tops, higher bottoms' - formed during the past 18 months - shows that bulls are controlling the chart.

The index is trading just 300 odd points below its lifetime high. Till it crosses convincingly above 12500, caution is advised due to a slowing economy and a rapidly spreading corona virus in China that is affecting global supply chains.

Weekly technical indicators are looking neutral to bearish. MACD has crossed below its signal line after falling from its overbought zone. RSI has moved above its 50% level but its upward momentum has stalled. Slow stochastic has fallen below its 50% level after forming a 'double top' reversal pattern inside its overbought zone. 

Nifty's TTM P/E moved up to 27.45, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating about the edge of its oversold zone. More near-term index consolidation is likely.

Bottomline? After touching lifetime highs in Jan '20, Sensex and Nifty charts have been in consolidation modes. With very few positive triggers left for the stock market in the near-term, the indices can drift down. Investors should increase liquidity by booking profits wherever available.

Nifty chart: a midweek technical update (Jan 15, 2020)

FIIs were net buyers of equity on Mon. and Wed. (Jan 13 and 15), but were net sellers on Tue. (Jan 14). Their total net buying was worth Rs 1.9 Billion. DIIs were net sellers of equity on all three trading days this week. Their total net selling was worth Rs 24.2 Billion, as per provisional figures.

India's CPI-based retail inflation jumped to 7.35% in Dec '19 from 5.54% in Nov '19 due to soaring food prices. With most banks offering less than 7% interest on fixed deposits, real rate of return has turned negative.

WPI-based wholesale inflation has increased to 2.59% in Dec '19 from 0.58% in Nov '19. Prices of food and non-food items rose higher.

The daily bar chart pattern of Nifty touched a new high of 12374 on Jan 14th, but corrected a little bit after facing resistance from the second up trend line (marked TL 2). The index is trading above its three rising EMAs in a bull market.

Though the index appears to be climbing a wall of worries because of rising inflation and rapidly decelerating GDP growth, some bearish technical signals are visible on Nifty's chart.

Note that the first up trend line (marked TL 1) - drawn through the index lows touched on Sep 19th, Oct 9th and 25th - was breached on Nov 13th. The index continued to move higher till Nov 28th, before succumbing to profit booking and falling below its 20 day EMA.

The index bounced up after forming a 'reversal day' bar (lower low, higher close) on Dec 11th. A second trend line (TL 2) has been drawn through the Sep 19th and Dec 11th lows. Nifty touched a new high (12294) on Dec 20th. Following a few days of sideways consolidation, TL 2 was breached with a downward 'gap' on Jan 6th.

Nifty dropped below its 50 day EMA after three months, but subsequently bounced up with an upward 'gap' to rise to a new high (on Jan 14), but has been facing resistance from TL 2. 

As per 'Corrective Fan Principle', breach of two up trend lines is bearish. Breach of a third up trend line (not yet drawn) usually indicates a change of trend. This hasn't happened yet - and may not happen at all - but any bearish signal at an index top should be treated with caution and respect.

Daily technical indicators are in bullish zones. MACD has crossed above its signal line. RSI is moving sideways above its 50% level. Both MACD and RSI are showing negative divergences by forming bearish patterns (lower tops, lower bottoms) while Nifty has climbed higher. Slow stochastic is well inside its overbought zone and can trigger a correction or consolidation. 

After touching a high of 28.67 on Mon. Jan 13, Nifty's TTM P/E has moved down a bit to 28.63, which remains well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is hovering near the edge of its oversold zone, hinting at some near-term index consolidation.

Q3 (Dec '19) results declared so far have not generated much hope of any improvement over disappointing Q2 (Sep '19) results. Small investors should remain circumspect and concentrate on preserving capital.

Nifty chart: a midweek technical update (Dec 18, 2019)

FIIs were net buyers of equity during the first three trading days this week. Their total net buying was worth Rs 38.1 Billion. DIIs were net sellers of equity on all three trading days. Their total net selling was worth Rs 29.7 Billion, as per provisional figures.

India's WPI-based inflation rose 0.58% in Nov '19 against 0.16% in Oct '19 due to increase in prices of food items. WPI inflation was 4.47% in Nov '18.

There are a few green shoots of revival visible in the Indian economy. During Nov '19, passenger air traffic volume rose 11.2%, fuel demand rose 10%, bitumen consumption indicated increase in road construction.

The daily bar chart pattern of Nifty rose to touch new intra-day (12237.70) and closing (12221.65) highs today (Dec 18), on the back of strong buying by FIIs. In the process, the index pierced and closed above the upper Bollinger Band.

All three EMAs are rising, and the index is trading above them in a bull market. The rally continues to be led by a few large-cap stocks, like RIL, HDFC. Mid-cap and small-cap stocks are continuing to struggle.

Daily technical indicators are looking bullish and showing upward momentum. MACD has crossed above its falling signal line in bullish zone. RSI is rising above its 50% level. Slow stochastic has entered its overbought zone. 

All three indicators are showing negative divergences by touching lower tops while the index rose to touch a new high. A corrective move may follow.

Nifty's TTM P/E has moved up to 28.48 - its highest level this month, and well inside its overbought zone. After a sharp fall from its oversold zone, the breadth indicator NSE TRIN (not shown) is rising in neutral zone, hinting at some near-term index downside.

Part resolution of US-China trade dispute has encouraged bulls in global stock markets. However, a possible impeachment process of the US President can trigger some profit booking.

Sensex, Nifty charts (Nov 15, 2019): consolidating near lifetime highs

In a holiday-curtailed trading week, FIIs were net buyers of equity on Mon. and Wed. (Nov 11 and 13), but were net sellers during Thu. and Fri. (Nov 14 and 15). Their total net selling was worth Rs 3.2 Billion. DIIs were net sellers of equity on Mon. and Wed., but were net buyers on the last two days. Their total net selling was worth Rs 5.1 Billion.

The macroeconomic indicators are hinting at deeper trouble. IIP contracted 4.3% in Sep '19 to its lowest level in 8 years. CPI inflation rose 4.62% in Oct '19 - to a 16 months high. WPI inflation eased to 0.16% in Oct '19 - to a 3 years low due to a fall in prices of fuel, power and manufactured goods.

Exports contracted 1.11% to US $26.38 Billion in Oct '19, while imports fell 16.31% to $37.39 Billion, leaving a lower trade deficit of $11 Billion against $18 Billion in Oct '18. Consumer spending fell for the first time in 4 decades in FY 2017-18 - driven by slack rural demand - according to a survey by NSO, which the government has decided to suppress.

BSE Sensex index chart pattern

After touching new intra-day and closing highs a week ago, the daily bar chart pattern of Sensex consolidated sideways with a slight downward bias. The index is trading above its three rising EMAs in a bull market, and gained 33 points on a weekly closing basis.

Daily technical indicators are giving conflicting signals. MACD has crossed below its rising signal line inside its overbought zone. ROC has dropped to its neutral zone. RSI is moving sideways along the edge of its overbought zone. Slow stochastic has slipped down from its overbought zone. Some more index consolidation or correction is likely.

On the daily closing Sensex and BSE 500 charts (not shown), last week's trading showed breakouts below small 'head and shoulders' patterns followed by pullbacks to the 'necklines' of the patterns. A correction below the 20 day EMA is a possibility. 

Q2 (Sep '19) results of India Inc. showed a marginal drop in revenues - the first decline in 9 quarters - due to slower demand, de-stocking of inventories and a higher base effect. However, net profits grew in double digits, thanks to the tax rate cut for companies.

The stock market seems worried about the Q2 (Sep '19) GDP number, which may drop below 5%. FIIs may have turned net sellers on Thu. and Fri. in anticipation of a low number. Best to sit on the sidelines for now.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty consolidated with a downward bias below the psychological 12000 level during the week. The index lost 13 odd points on a weekly closing basis, but traded well above its three weekly EMAs in a long-term bull market.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. RSI is facing resistance from the edge of its overbought zone. ROC and Slow stochastic are moving sideways inside their respective overbought zones. Some more index consolidation or correction is possible.

Nifty's TTM P/E has slipped down to 27.32 - which is well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at more near-term index consolidation.  

Bottomline? Sensex and Nifty charts are consolidating well above their rising daily and weekly EMAs in long-term bull markets. Both indices are close to their lifetime highs. Stay invested, but this is not a good time to buy - unless you are adept at stock picking.

Nifty chart: a midweek technical update (Oct 16, 2019)

FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 20.2 Billion. DIIs were net sellers of equity on Mon. Oct 14, but were net buyers on the next two trading days. Their total net buying was worth Rs 20.8 Billion, as per provisional figures.

India's CPI-based inflation in Sep '19 climbed to a 14 months high of 3.99% against 3.28% in Aug '19 and 3.70% in Sep '18 due to costlier vegetables and pulses. However, WPI-based  inflation dropped to 0.33% in Sep '19 against 1.08% in Aug '19.

India's trade deficit fell to a 7 months low of US $10.86 Billion in Sep '19, as exports contracted 6.57% to US $26.03 Billion, while imports dropped to a 3 year low of US $36.89 Billion - indicating weak demand in a slowing economy.

The daily bar chart pattern of Nifty has been rallying on the back of FII buying during the past four trading sessions. The index has closed above its three EMAs in bull territory.

Further upside is likely, but the (purple) down trend line and the downward 'gap' formed on Jul 8 (i.e. the zone between 11600 and 11800) is expected to provide strong resistance. 

Daily technical indicators are in bullish zones. MACD has just crossed above its signal line. RSI is rising above its 50% level. Slow stochastic is above its 50% level, but not showing strong upward momentum. 

Nifty's TTM P/E has moved up to 26.48, which is well inside its overbought zone and higher than its long-term average. The breadth indicator NSE TRIN (not shown) has fallen from its oversold zone, hinting at some more near-term index upside.

Despite a good monsoon and low inflation, macroeconomic fundamentals are looking weak. Commercial vehicle sales are down. So are imports and exports. These are signs of a struggling economy.

Q2 (Sep '19) results declared so far have been more or less as per expectations. That is good news. However, top line and bottom line pressure are clearly visible. The rest of the earnings season is unlikely to throw up many positive earnings surprises.

The stock market tends to 'discount' bad news in advance. That means selective buying in fundamentally strong stocks can be initiated. But stay with market leaders among large-cap stocks. The pain in mid-cap and small-cap stocks is going to last a while longer.

Nifty chart: a midweek technical update (Sep 18, 2019)

FIIs were net sellers of equity on all three trading days this week. Their total net selling was worth Rs 25.2 Billion. DIIs were net buyers of equity on all three trading days. Their total net buying was worth Rs 11.7 Billion, as per provisional figures.

India's WPI-based inflation was 1.08% in Aug '19 - the same as in Jul '19 but much lower than 4.62% in Aug '18. Rise in inflation of food items was balanced by deflation in fuel and power.

The Finance Ministry is considering a fourth 'booster' dose to revive a sliding economy, after the first three 'booster' doses failed to generate any significant revival in 'animal spirits'. 

For the past seven weeks, the daily bar chart pattern of Nifty has been consolidating sideways with a slight downward bias, touching progressively lower tops. The 'death cross' (marked by grey oval) of the 50 day EMA below the 200 day EMA at the beginning of the month had technically confirmed a bear market. 

Bulls are fighting hard, but the resistance zone between 11100 and 11200 has proved to be a tough hurdle. The Aug 23 low of 10637 is in danger of being tested, and breached.

The index had bounced up after testing support from the lower Bollinger Band at the beginning of the month. But the counter-trend rally lost steam after crossing above the middle band (20 day SMA - marked by green dotted line).

Daily technical indicators are in bearish zones. MACD is seeking support from its rising signal line. RSI is below its 50% level. Slow stochastic formed a 'double top' reversal pattern at the edge of its overbought zone, and has dropped sharply below its 50% level. 

Nifty's TTM P/E has slipped down to 26.66, but remains inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating near the edge of its oversold zone, hinting at some near-term index consolidation.

Three 'booster packages' from the Finance Minister have come and gone without making a dent on the bearish sentiment of FIIs. Bulls are hoping for a miracle from our popular leader. But he seems more interested in fiddling around with photo-ops while the economy is sinking.

Q2 (Sep '19) corporate earnings may be worse than Q1 (Jun '19) numbers. The upcoming festive season sales may prevent a total washout. Small investors should be extremely wary about bottom fishing.

Sensex, Nifty charts (Aug 16, 2019): fight back by bulls fizzling out?

In a holiday-shortened trading week, FIIs were net sellers of equity on Tue. and Fri. (Aug 13 and 16), but were net buyers on Wed. Aug 14. Their total net selling was worth Rs 3.6 Billion. DIIs were net buyers on all three trading days of the week. Their total net buying was worth Rs 28.8 Billion, as per provisional figures.

India's CPI based inflation eased marginally to 3.15% in Jul '19 from 3.18% in Jun '19 due to softening fuel prices. CPI inflation was 4.17% in Jul '18. WPI based inflation dropped to a multi-year low of 1.08% in Jul '19 from 2.02% in Jun '19. WPI inflation was 5.27% in Jul '18.

India's merchandise exports grew 2.25% to US $26.3 Billion in Jul '19 against $25.75 Billion in Jul '18. Imports declined 10.4% to $39.76 Billion in Jul '19 against $44.39 Billion in Jul '18. Trade deficit narrowed to $13.46 Billion in Jul '19 from $18.64 Billion in Jul '18.

BSE Sensex index chart pattern

Within a larger 'broadening top' pattern, the daily bar chart pattern of Sensex appears to be forming a 'rising wedge' pattern from which the likely breakout is downwards.

A sharp fall on Tue. Aug 13 dropped the index back inside the 'support zone' (between 35900 and 37100). Sensex bounced up above the 'support zone' on the back of combined FII and DII buying on Wed. Aug 14 and closed the truncated week of trading below its three EMAs in bear territory.

Daily technical indicators are looking neutral to bearish. MACD has crossed above its signal line in bearish zone. ROC, RSI and Slow stochastic have moved up towards their respective neutral zones, but are not showing much upward momentum. 

There have been rumours of tax tweaks for FIIs and a stimulus package for the economy as finance ministry and PMO officials have been huddling together to find some way out of the economic mess they have created. 

Any 'band aid' policy adjustments are unlikely to provide more than a short-term boost to sentiment. Inverted bond yield curves in Europe and USA may be giving an early warning of a global recession. 

Negative sentiment and economic uncertainty are not conducive to bullish animal spirits, but they are ideal for bearish animal spirits. Expect more near-term downside and some consolidation before lower base effect kicks in from Q3 (Dec '19) onwards.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty moved above the 11100 level intra-week, but dropped back to close inside the 'support zone' (between 10700 and 11100) - losing about 0.6% on a weekly closing basis.

The index continued to trade inside a large 'broadening top' pattern and below its 20 week and 50 week EMAs. Bears are threatening to take complete control of the chart. Bullish response has not been very forceful.

Weekly technical indicators are looking neutral to bearish. MACD is below its signal line, and has fallen to its neutral zone. ROC is below its falling 10 week MA and is moving sideways inside oversold zone. RSI has bounced up from the edge of its oversold zone. Slow stochastic is moving sideways at the edge of its oversold zone. 

Nifty's TTM P/E has moved down to 27.33 - which is above its long-term average in overbought zone. Despite a sharp fall, the breadth indicator NSE TRIN (not shown) remains well inside its oversold zone. Some near-term index upside or some consolidation is possible.

Bottomline? Sensex and Nifty charts are consolidating near long-term support zones. Rumours of an economic stimulus and a tax tweak for FIIs have raised hopes of battered bulls. Small investors should remain on the sidelines.