S&P 500 and FTSE 100 charts (Sep 22 '17): bears getting ready to attack?

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 failed to build on the previous week's breakout above the 2490 level. The index touched a new high of 2509 on Wed. Sep 20, but closed almost flat for the week.

All three EMAs are rising, and the index is trading above them in a bull market. However, daily technical indicators are correcting overbought conditions and can trigger a correction or some more consolidation.

In case the index falls below the 2490 level - and the possibility can't be ruled out because of a bearish weekly pattern (see below) - expect support from the zone between 2450 & 2470.

The war of words between the US President and North Korea's 'rocket man' is creating unnecessary tension that is keeping global markets on tenterhooks. Uncertainty in the market may be just the opportunity that bears are looking for.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market, but may be in the process of forming a bearish 'evening star' candlestick pattern. Weekly technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: " ...the index is in the process of pulling back towards the 200 day EMA. Those who missed selling on Friday's downward break out can use the pullback as a selling opportunity."

The index pullback resulted in a weekly close above the 200 day EMA and the 'support/resistance' level of 7300 - with a 1.3% gain for the week.

Daily technical indicators are in the process of correcting oversold conditions, but remain in bearish zones. Any attempt at rallying further is likely to face resistance from the falling 20 day and 50 day EMAs.

A dark bearish shadow (viz. a 'descending triangle' at an index top) is covering the chart. Bulls have their work cut out to retrieve the situation.

On longer term weekly chart (not shown), the index bounced up after receiving support from its 50 week EMA, and closed well above its 200 week EMA in a long-term bull market. The 20 week EMA is forming a bearish 'rounding top' pattern. Weekly MACD is falling below its signal line in bullish zone. RSI is trying to move above its 50% level. Slow stochastic is ready to re-enter its oversold zone.

S&P 500 and FTSE 100 charts (Sep 15 '17): bulls rule one, bears rule the other

S&P 500 index chart pattern

The following remarks were made in last week's post on the daily bar chart pattern of S&P 500: 

"The index may be in the process of forming a 'diamond' pattern. A 'diamond' can be a reversal pattern or a continuation pattern. So, await the breakout before deciding to buy or sell. An upward breakout above 2480 will be bullish. A downward breakout below 2440 will be bearish."

On Mon. Sep 11, the index opened trading with an upward 'gap' and broke out above the 'diamond' pattern and the 2480 level. It closed just below 2490. During the rest of the week, the index consolidated sideways with an upward bias, and closed at a lifetime high of 2500 - with a gain of 1.6% on a weekly closing basis.

Note the large spike in volume on Fri. Sep 15. That may be the sign of a 'buying climax' that can lead to a pullback towards the 'diamond' pattern. Such a pullback will provide a buying opportunity to those who missed buying on the upward break out.

Daily technical indicators are in bullish zones. MACD is rising above its signal line in overbought zone. RSI is moving sideways below its overbought zone. Slow stochastic is well inside its overbought zone. MACD and RSI are showing negative divergences by failing to touch new highs with the index.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern

The following remark in last week's post on the daily bar chart pattern of FTSE 100 provided adequate warning to investors: "A likely downward breakout below 7300 can lead to a test of support from, or even a breach of, the 200 day EMA."

The index made a couple of futile attempts to move above the (purple) down trend line on Mon. Sep 11 & Tue. Sep 12. Bears took control right away.

On Thu. Sep 14, the index dropped and closed just below the support level of 7300. On Fri. Sep 15, the index fell sharply below the 200 day EMA and the 7200 level intra-day, before managing to close above 7200 - with a loss of 2.2% on a weekly closing basis.

(At the time of writing this post, the index is in the process of pulling back towards the 200 day EMA. Those who missed selling on Friday's downward break out can use the pullback as a selling opportunity.)

Daily technical indicators are looking bearish and showing downward momentum. Some more correction - perhaps a test of the Apr '17 low of 7100 - is possible.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA and is seeking support from its 50 week EMA, but closed well above its 200 week EMA in a long-term bull market. Weekly MACD is falling below its signal line in bullish zone. RSI has fallen below its 50% level. Slow stochastic has re-entered its oversold zone.

S&P 500 and FTSE 100 charts (Sep 08 '17): bears refuse to give up

S&P 500 index chart pattern

The following comment appeared in last week's post on the daily bar chart pattern of S&P 500: "Slow stochastic has entered its overbought zone, and may trigger a pullback towards the 'Support/Resistance zone'."

On a holiday-shortened trading week, the index formed a small downward 'gap' of 2 points and dropped below the 'Support/Resistance zone' intra-day on Sep 5. It managed to bounce up and close just below 2460 (inside the 'Support/Resistance zone').

For the rest of the week, the index traded in a range between 2460 & 2470 but touched lower tops each day. The index closed above its three rising EMAs in a bull market, but lost 0.5% on a weekly closing basis.

Daily technical indicators are in bullish zones but giving conflicting signals. MACD is rising above its signal line. RSI is seeking support from its 50% level. Slow stochastic has dropped from its overbought zone.

The index may be in the process of forming a 'diamond' pattern. A 'diamond' can be a reversal pattern or a continuation pattern. So, await the breakout before deciding to buy or sell.

An upward breakout above 2480 will be bullish. A downward breakout below 2440 will be bearish. The pattern is still forming, and may not turn out to be a 'diamond' at all - but forewarned is forearmed.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones. Only Slow stochastic is showing upward momentum.

FTSE 100 index chart pattern

The following comment appeared in last week's post on the daily bar chart pattern of FTSE 100: "... a convincing move above the Aug 8 '17 top of 7552 is required if bulls are to regain control of the chart." 

The index failed to build on its previous week's bullishness as resistance from the (purple) down trend line proved to be too strong. 

After falling below its 20 day and 50 day EMAs to an intra-day low of 7322 on Sep 6, the index ended the week with a loss of 0.8% on a weekly closing basis.

FTSE is still trading above its rising 200 day EMA in a bull market, but the formation of a large bearish 'descending triangle' pattern should be a red flag for bulls.

Daily technical indicators are not showing any upward momentum. MACD and RSI are in bearish zones. Slow stochastic is seeking support from its 50% level.

A likely downward breakout below 7300 can lead to a test of support from, or even a breach of, the 200 day EMA.

On longer term weekly chart (not shown), the index closed at its 20 week EMA, and above its rising 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is sliding below its falling signal line in bullish zone. RSI has bounced up a bit after receiving support from its 50% level. Slow stochastic is in bearish zone but showing some upward momentum.

Nifty chart: a midweek technical update (Aug 30 ‘17)

FIIs were net sellers of equity worth Rs 16 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 21.6 Billion.

Nifty made a couple of futile attempts to breach the (purple) down trend line on Mon. & Wed. (Aug 28 & 30). On Tue. Aug 29, it dropped to seek support from its 50 day EMA.

GST collection for the month of Jul '17 was Rs 922 Billion - exceeding the government's target of Rs 910 Billion - despite only 3.8 million of the 5.8 million GST registered entities paying up so far.

RBI has drawn up a second list of 40 bank loan defaulters against whom proceedings may be initiated under the Insolvency and Bankruptcy code. The cleaning up process of the NPA problem in the banking system continues.

The daily bar chart pattern of Nifty had corrected below its 20 day and 50 day EMAs to the 'support-resistance' level of 9700 on Aug 11.

Since then, the index has been consolidating sideways - alternatively moving above its 20 day EMA and falling below its 50 day EMA.

The entire trading for the month has occurred below the (purple) down trend line and the 9700 level - forming a 'descending triangle' like pattern.

A breakout above the down trend line will negate the 'descending triangle', but may not give bulls the upper hand because the 10000 level is likely to provide strong resistance. (The technical reason for the resistance at 10000 was explained in an earlier post.) 

A fall below 9700 may lead to a fall towards 9300, and a test of support from the rising 200 day EMA. Note that the index is trading well above its 200 day EMA in a bull market. 

Technical indicators are giving conflicting signals, which is often the case during periods of consolidation. MACD is in bearish zone - moving sideways below its falling signal line. RSI and Slow stochastic are facing resistances from their respective 50% levels.

Nifty's TTM P/E is at 25.54 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is in neutral zone. The index can continue to consolidate for a while - may be till Q2 (Sep '17) results of India Inc. show earnings improvement.

North Korea's regular missile launches - undoubtedly at the behest of China, which is its closest ally - has kept FIIs in 'risk-off' mode. Unless they resume buying, Nifty is not going to move much higher.

S&P 500 and FTSE 100 charts (Aug 25 '17): bears tighten their grips

S&P 500 index chart pattern

The following comments from last week's post on the daily bar chart pattern of S&P 500 are worth noting: 

"RSI and Slow stochastic are showing positive divergences by not falling lower with the index. Friday's trading has formed another 'doji' candlestick. A technical bounce towards the 'support/resistance zone' is likely. Expect bears to use such a bounce to sell."

On Mon. Aug 21, the index touched an intra-day low of 2417 but bounced up to close just below the 'GAP' formed on Jul 12 (see chart) - forming a 'reversal day' bar (lower low, higher close).

The next day, the index rose above its 50 day EMA but faced strong resistance from the falling 20 day EMA inside the 'Support/Resistance zone' between 2450 & 2460. During Wed. & Thu. (Aug 23 & 24), the index traded between the 'Support/Resistance zone' and the Jul 12 'GAP'.

On Fri. Aug 25, the index crossed above its falling 20 day EMA intra-day but faced twin resistances from the (purple) down trend line and the 'Support/Resistance zone'. It closed below its 20 day and 50 day EMAs, but gained 17 points (0.7%) on a weekly closing basis.

Daily technical indicators are in bearish zones and showing downward momentum. Some more correction is likely. 

The index is trading well above its rising 200 day EMA in a longer-term bull market. However in the near-term, the index is in a down trend since touching a lifetime high of 2491 on Aug 8, and has formed a bearish pattern of 'lower tops, lower bottoms'.

As per theory of trend lines, the down trend will remain in force till the trend line gets breached convincingly. Higher volumes on recent down-days indicate that bears may not release their grip in a hurry.

On longer term weekly chart (not shown), the index received support from its 20 week EMA for the second week in a row, and closed above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but are showing negative divergences by falling below their respective Apr '17 lows.

FTSE 100 index chart pattern

Please note the following comments from last week's post on the daily bar chart pattern of FTSE 100: "The entire trading during the past three months or so have occurred within a bearish 'descending triangle' pattern - barring a 'false' breakout in early-Aug '17."

The index spent another week consolidating within the 'descending triangle'. It bounced up after receiving support from the 7300 level and rose above its 20 day and 50 day EMAs, but faced strong resistance from the (purple) down trend line.

None of the three daily technical indicators are showing much upward momentum. MACD and Slow stochastic are in bearish zones. RSI is in neutral zone. Expect the index to correct towards 7300 again.

The index continues to trade above its rising 200 day EMA in a bull market. As and when the 7300 level gets breached, the index can fall to 7000.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are looking neutral to bearish. RSI is receiving support from its 50% level. MACD is falling below its signal line in bullish zone. Slow stochastic has dropped inside its oversold zone. MACD and Slow stochastic are showing negative divergences by falling below their Apr '17 lows.

S&P 500 and FTSE 100 charts (Aug 18 '17): bears trying to wrest control

S&P 500 index chart pattern

The following remarks appeared in the previous post on the daily bar chart pattern of S&P 500:

"On Fri. Aug 11, the index formed a 'doji' candlestick, which indicates indecision among bulls and bears that can potentially lead to a technical bounce towards the 'support/resistance zone'.
Some more correction or consolidation is possible. RSI and Slow stochastic are showing negative divergences by falling lower than their Jul '17 lows." 

On Mon. Aug 14, the index formed an upward 'gap' and bounced up above the 'support/resistance zone' (between 2450 & 2460) and the 20 day EMA. After touching a lower top of 2475, the index formed another 'doji' candlestick on Wed. Aug 16.

A sharp sell-off followed on Thu. Aug 17 and Fri. Aug 18. The index dropped below the 'support/resistance zone' and its 20 day and 50 day EMAs for the second week in a row.

In the process, the index closed the two upward 'gaps' - formed on Aug 14 and an earlier one (marked on chart) on Jul 12. Since the index is trading well above its rising 200 day EMA in a bull market, closure of an upward 'gap' should be followed by a resumption of the up move.

However, by touching a lower top on Aug 16 and then falling to a low of 2421 on Aug 18, the index has confirmed a down trend, and formed a bearish pattern of 'lower tops, lower bottoms'. 

Daily technical indicators are bearish and showing downward momentum. RSI and Slow stochastic are showing positive divergences by not falling lower with the index. Friday's trading has formed another 'doji' candlestick. 

A technical bounce towards the 'support/resistance zone' is likely. Expect bears to use such a bounce to sell. A fall to the 2390-2400 zone is possible. 

On longer term weekly chart (not shown), the index received support from its 20 week EMA, and closed well above its rising 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing downward momentum.

FTSE 100 index chart pattern

The following comment appeared in last week's post on the daily bar chart pattern of FTSE 100: "Expect some short covering by bears, which can lead to a technical bounce."

As expected, there was a technical bounce that led to a close above the 20 day and 50 day EMAs on Wed. Aug 16. However, the resistance from the (purple) down trend line - which has dominated the chart since Jun '17 - proved too strong.

The index dropped to seek support from the 7300 level for the second week in a row, but managed to eke out a 19 points gain on a weekly closing basis.

Daily technical indicators are bearish and showing downward momentum. The entire trading during the past three months or so have occurred within a bearish 'descending triangle' pattern - barring a 'false' breakout in early-Aug '17.

A fall below 7300 and the rising 200 day EMA appears on the cards.

On longer term weekly chart (not shown), the index closed below its 20 week EMA for the second week in a row but is trading above its rising 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are looking bearish. Slow stochastic has dropped well inside its oversold zone, and can trigger a technical bounce.

S&P 500 and FTSE 100 charts (Nov 11 '16): relief rallies face bear resistance

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: "All three daily technical indicators are looking oversold, which can trigger a pullback towards the 200 day EMA and the 2120 level. Bears may use the opportunity to sell again."

The pullback was much stronger than expected. A huge volume surge sent the index soaring past its 200 day EMA and the 2120 level and breached the down trend line of the 'descending triangle' pattern.

After crossing the 2180 level intra-day on Thu. Nov 10, the index faced bear selling and pulled back to the top of the 'descending triangle' before bouncing up to close above the 2160 level with a weekly gain of 3.8%.

What triggered the 100 points price spurt from last week's low? Oversold technical conditions led to some short covering and value buying. 

Trump's unexpected victory in the US Presidential election then led to a 'relief rally' as the 'event uncertainty' got removed and the market probably expected that a businessman at the helm will be good for business growth.

Daily technical indicators are in bullish zones. MACD rose sharply to enter positive zone. RSI crossed above its 50% level but lost upward momentum. Slow stochastic entered its overbought zone but also lost upward momentum. 

Some consolidation can be expected around current levels before the index attempts to touch a new high.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market for the 36th week in a row. Weekly MACD and RSI are in bullish zones. Slow stochastic has emerged from its oversold zone. All three indicators are showing upward momentum.

FTSE 100 index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: "All three daily technical indicators are looking oversold. A technical bounce is likely. Bears may use such a bounce to sell again."

A strong technical bounce took the index past its falling 20 day and 50 day EMAs by Wed. Nov 9. The next day, bears flexed their muscles as the index breached the down trend line intra-day but stopped short of the 7000 level and dropped below its 20 day and 50 day EMAs - forming a 'reversal day' bar.

By the end of the week, the index fell further to test support from the 6700 level but closed at 6730 with a 0.5% weekly gain.

All three daily technical indicators are in bearish zones and showing downward momentum. A downward breach of the 6700 level and a test of support from the 200 day EMA is likely.

On longer term weekly chart (not shown), the index closed below its 20 week EMA for two straight weeks, but above its 50 week and 200 week EMAs in a long-term bull market for the 20th week in a row. Weekly technical indicators are looking bearish and showing downward momentum. 

S&P 500 and FTSE 100 charts (Nov 04 '16): fall sharply below descending triangle patterns

S&P 500 index chart pattern

The following comments were made in last week's post on the daily bar chart pattern of S&P 500: "A breakdown below the 'descending triangle' pattern and a test of support from the rising 200 day EMA appears imminent."

On Nov 1, the index fell sharply below the support level of 2120 and dropped below its rising 200 day EMA intra-day, but bounced up to close just above 2110. The respite for bulls was short-lived.

The index continued to correct for the rest of the week and closed below the 200 day EMA and the 2090 level, with a weekly loss of almost 2%.

All three daily technical indicators are looking oversold, which can trigger a pullback towards the 200 day EMA and the 2120 level. Bears may use the opportunity to sell again.

Uncertainty about the results of the US Presidential election, and concerns about an interest rate hike by the US Fed may have been reasons for last week's sell-off. 

However, the index had been in a corrective mode after forming a small 'double top' reversal pattern in Aug '16, and subsequently formed a bearish 'descending triangle' pattern. Such bearish patterns - specially when formed at or near a market top - give adequate advance warning of a correction. 

On longer term weekly chart (not shown), the index dropped sharply and closed below its 50 week EMA for the first time in more than 8 months, but closed well above its 200 week EMA in a long-term bull market for the 35th week in a row. Weekly MACD and RSI are looking bearish and showing downward momentum. Slow stochastic has dropped inside its oversold zone, which can trigger a technical bounce.

FTSE 100 index chart pattern

The following comments were made in last week's post on the daily bar chart pattern of FTSE 100: "Frequent tests of a support (or resistance) level weakens it. A breakdown below 6940 and a test of support from the rising 50 day EMA may be on the cards." 

On Nov 1, the index dropped below the support level of 6940, but received support from its 50 day EMA and bounced up a bit. But the 50 day EMA failed to provide any further support during the rest of the week.

The index kept falling and closed below the 6700 level - its lowest close in nearly two months, with a weekly loss of 4.3%.

All three daily technical indicators are looking oversold. A technical bounce is likely. Bears may use such a bounce to sell again.

Concerns about the result of US Presidential elections and a likely hard-BrExit may be reasons for the sharp correction last week.

Note that the index had formed a small 'double top' reversal pattern a month back, followed by a 'descending triangle' pattern (refer last week's post). Such bearish patterns -  when formed at or near a market top - give advance warning of an impending correction.

On longer term weekly chart (not shown), the index dropped sharply to close below its 20 week EMA, but closed above its 50 week and 200 week EMAs in a long-term bull market for the 19th week in a row. Weekly technical indicators are looking bearish and showing downward momentum. 

S&P 500 and FTSE 100 charts (Oct 28 '16): on the verge of breaking down from descending triangle patterns

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 crossed above its falling 20 day and 50 day EMAs on Mon. Oct 24, but fell short of the down trend line of the 'descending triangle' pattern (within which it has been consolidating for the past 2 months).

The index dropped and closed below its 20 day and 50 day EMAs the next day and fell further to test support from the 2120 level before bouncing up a bit. The index closed 15 points lower for the week. 

Strong and rising volumes on four consecutive down days are suggesting bear domination. A breakdown below the 'descending triangle' pattern and a test of support from the rising 200 day EMA appears imminent.

All three daily technical indicators are in bearish zones and showing downward momentum - hinting at some more correction. 

On longer term weekly chart (not shown), the index formed a 'reversal week' bar (higher high, lower close) and dropped below its 20 week EMA, but closed well above its 50 week and 200 week EMAs in a long-term bull market for the 34th week in a row. Weekly technical indicators are looking bearish, and showing downward momentum.

FTSE 100 index chart pattern

The structure of the daily chart pattern of FTSE 100 has become a little bearish. The index has formed a small 'descending triangle' pattern by testing support from the 6940 level on each of the last three days of the trading week.

Frequent tests of a support (or resistance) level weakens it. A breakdown below 6940 and a test of support from the rising 50 day EMA may be on the cards.

Note that the 'descending triangle' pattern formation was preceded by negative divergences visible on all three daily technical indicators - which touched lower tops while the index rose to touch a higher top (marked by long blue arrows).

MACD is falling below its signal line in positive zone. RSI is seeking support from its 50% level. Slow stochastic formed a head-and-shoulders pattern and is falling towards its oversold zone.

On longer term weekly chart (not shown), the index formed a 'reversal week' bar (higher high, lower close) but closed above its three weekly EMAs in a long-term bull market for the 18th week in a row. Weekly technical indicators are correcting overbought conditions. 

S&P 500 and FTSE 100 charts (Oct 21 '16): consolidating after bouncing up from support levels

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 dropped towards the support level of 2120 on Mon. Oct 17, but bounced up. However, bulls couldn't make much headway during the rest of the week as the index faced strong resistance from its falling 20 day EMA.

The index closed 8 points higher for the week, and is trading above its rising 200 day EMA in a bull market - but the longer it consolidates within the 'descending triangle' pattern the greater is the possibility of a sharp breakdown below the 2120 level.

Higher volumes on the last two days of the week (both down days) indicate that bears are unlikely to release their grip in a hurry.

Daily technical indicators are in bearish zones and not showing much upward momentum. The sideways consolidation may continue a bit longer before a likely drop to test support from the 200 day EMA can occur.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market for the 33rd week in a row. The index is correcting after forming a bearish 'rounding top' pattern. Weekly technical indicators are looking bearish, though MACD and RSI are still in bullish zones.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 bounced up weakly after receiving good support from the 6940 level, and closed with a token weekly gain of 7 points.

Note that 6940 had acted as a resistance level during Aug-Sep '16. On Oct 3, the resistance level was breached convincingly and has turned into a support level.

All three EMAs are rising and the index is trading above them in a bull market. However, bulls may have to wait for a while before the index can touch a new high.

Daily technical indicators are in bullish zones but not showing any upward momentum. Expect some sideways consolidation in the near term.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market for the 17th week in a row. Weekly technical indicators are looking overbought and not showing any upward momentum. 

BSE Sensex and NSE Nifty charts (Oct 21, 2016): form bullish flag patterns

FIIs remained net sellers of equity during the week gone by. Their net selling was worth Rs 6.6 Billion, as per provisional figures. DIIs were net buyers of equity worth Rs 22.2 Billion. 

Sensex gained 1.46% and Nifty gained 1.3% on a weekly closing basis. Both indices broke down below 'descending triangle' patterns - as mentioned in last week's post.

However, subsequent recoveries from support levels have negated the triangle patterns. Both indices appear to have formed bullish 'flag' patterns - from which the likely breakouts should be upwards.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex dropped and closed below the long-term support level of 27600 on Mon. Oct 17 but bounced up sharply the next day, only to face resistance from its entangled 20 day and 50 day EMAs.

The index oscillated about its two shorter-term EMAs for the rest of the week. The upper down trend line (of the redrawn 'flag')  - which was earlier part of the 'descending triangle' pattern - provided resistance on the upside.

Can the index correct some more, or will it breakout upwards right away? That will depend on how Q2 (Sep 16) results pan out. 

Last week's FII selling was well absorbed by the DIIs. Still the index failed to make much headway.

Daily technical indicators are not looking strongly bullish, though all four are showing some upward momentum. MACD and ROC are still inside their respective negative zones. RSI and Slow stochastic have crossed above their 50% levels.

The lower edge of the 'flag' is inside 'Gap1' formed on Jul 11, and should provide good support if the index corrects some more. An upward breakout may face resistance from the 28600 level.

Sensex is trading well above its rising 200 day EMA in a bull market. A 'flag' pattern is a fairly reliable 'continuation' pattern. So, expect the index to breakout upwards. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty dropped below the 8550 level and the 20 week EMA, but bounced up strongly after receiving good support from the 8500 level.

In a mid-week technical update, the earlier bearish 'descending triangle' pattern was redrawn as a bullish 'flag' pattern. Why the switch? Because technical analysis is not a science, and is based on price action that reflects the combined greed and fear of market participants.

Chart patterns evolve and change and don't always play out as expected - just as market mood changes from bullish to bearish and back to bullish during the same day.

Weekly technical indicators are looking bearish. MACD, RSI, Slow stochastic are showing downward momentum in bullish zones. ROC is in neutral zone - trying to recover after slipping into negative territory.

Nifty's TTM P/E at 23.23 remains higher than its long-term average. The breadth indicator NSE TRIN (not shown) is hovering above its overbought zone. Some more correction within the 'flag' pattern is possible before the eventual upward breakout.

Bottomline? Sensex and Nifty charts appear to have formed bullish 'flag' patterns, from which the likely breakouts should be upwards. The correction is providing adding opportunities. Be stock specific and buy in small lots.

Nifty chart: a midweek technical update (Oct 19 '16)

FIIs were net sellers of equity worth Rs 4 Billion during the first three days of trading this week, as per provisional figures. DIIs were net buyers of equity worth Rs 11.3 Billion.

Q2 (Sep '16) results declared so far have been more or less as per expectations. There has not been any indication of significant earnings improvements.

The news of Essar Oil's sale to Rosneft has come as a boost for the beleaguered banking sector, which has been reeling under the weight of mounting NPAs. Hopefully, a major portion of the sale proceeds will be used to retire debt.

The ongoing 7 weeks long correction on the daily bar chart pattern of Nifty now appears to be forming a 'flag' pattern, which has bullish implications.

Why bullish? Because 'flag' patterns are 'continuation' patterns that move in a direction opposite to the previous price move. Since the previous move was a bull rally, the 'flag' is a small pause before the rally can resume.

What happened to the bearish 'descending triangle' patterns that were being discussed in previous posts? 

The expected breakdown below 8650 on Sep 29 was immediately followed by an upward bounce - negating the first (smaller) 'descending triangle'. The expected breakdown below 8550 on Oct 17 was also followed immediately by an upward bounce, which negated the second (larger) 'descending triangle'.

Chart patterns evolve continuously and do not always play out as expected. The 'flag' pattern appears to be more plausible now - so we will stay with it till a breakout occurs. 

The fact that Nifty received support from the 8500 level without testing the lower edge of the 'flag' on Oct 17 also raises the possibility of an upward breakout.

Can the index drop below 8500 and fall below the 'flag'? Nothing can be ruled out on price charts. If it does fall, support can be expected from the 'gap' formed on Jul 11 and below it, from the rising 200 day EMA.

Since 'flag' patterns are quite reliable 'continuation' patterns, a fall below the 'flag' has low probability. However, the index may continue to correct within the 'flag' for a while longer.

A 'flag' has measuring implications, since it often forms in the middle of an up (or down) move. Since the rally from the Feb '16 low covered about 2150 points to the Sep '16 top, the index has an upward target of 2150 points from the upward breakout level.

Remember that an upward breakout should be accompanied by a significant increase in volumes for the breakout to be technically valid.

Daily technical indicators are in bearish zones, and not showing any upward momentum - except Slow stochastic, which has recovered sharply from its oversold zone.

Nifty's TTM P/E remains high at 23.35. The breadth indicator, NSE TRIN (not shown), has dropped sharply towards its overbought zone - hinting at a correction.

Any dip should be used to buy. 

Gold and Silver charts: break down below 'descending triangle' patterns into bear territories

Gold chart pattern

The daily bar chart pattern of Gold broke down sharply below the 'descending triangle' pattern on Oct 4. After receiving only brief support from its 200 day EMA, gold's price dropped below the support level of 1260 on Oct 6.

The next day, gold's price dropped below the 1250 level intra-day -  meeting the downward target of 60 points below the 1310 level (refer previous post). A sideways consolidation between 1250 and 1260 ensued thereafter. 

Gold's price is trading below its three EMAs in bear territory. All three daily technical indicators are in their respective oversold zones. An upward bounce may occur at any time. 

Now that bears have regained control of the chart, they are likely to sell on every rise in price.

On longer term weekly chart (not shown), gold’s price has dropped and closed below its three weekly EMAs for 2 weeks in a row. The 'golden cross' of the 50 week EMA above the 200 week EMA was prevented. Weekly technical indicators are looking bearish and showing negative divergences by touching lower bottoms. The 10-months long bear market rally may be ending.

Silver chart pattern

The daily bar chart pattern of Silver broke down sharply below the 'descending triangle' pattern with strong volume support on Oct 4. The 200 day EMA provided brief downside support.

Silver's price dropped below its 200 day EMA and the support level of 17.50 on Oct 6, and has been consolidating sideways below its three EMAs in bear territory since then.

All three daily technical indicators are looking oversold. That can trigger a technical bounce. Bears will probably use the bounce to sell.

On longer term weekly chart (not shown), silver’s price has dropped and closed below its three weekly EMAs for 2 weeks in a row. Weekly technical indicators are looking bearish and showing negative divergences by touching lower bottoms. More correction is likely.

S&P 500 and FTSE 100 charts (Oct 14 '16): bears keep bulls in check

S&P 500 index chart pattern

The following comments were made in the previous post on the daily bar chart pattern of S&P 500: "Daily technical indicators are in neutral zones, and showing a bit of downward momentum. Some more consolidation, or a correction towards the 2120 level can be expected."

The index dropped below the 2120 level intra-day on Thu. but bounced up to close inside the 'descending triangle' pattern within which it has been consolidating for the past 8 weeks.

The 20 day EMA has crossed below the 50 day EMA, and the index is trading below them. However, the 200 day EMA is still rising - keeping bullish hopes alive.

Higher volumes on recent down-days indicate bears have the stronger hand. All three daily technical indicators are in bearish zones  but are showing positive divergences by failing to touch lower bottoms with the index.

An upward bounce towards the blue down trend line is a possibility. Bears are likely to use the opportunity to sell again.

On longer term weekly chart (not shown), the index closed below its 20 week EMA but above its 50 week and 200 week EMAs in a long-term bull market for the 32nd week in a row. The index may be correcting after forming a bearish 'rounding top' pattern. Weekly technical indicators are still in bullish zones but showing downward momentum.

FTSE 100 index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: "Daily technical indicators are in bullish zones, but their upward momentum have stalled. Expect some consolidation, and a possible pullback towards the top of the 'ascending triangle' before the index attempts to touch a new high."

Both the expected index movements occurred, but in reverse order. The index rose to touch a new lifetime high of 7130 on Tue. Oct 11 - only to form a 'reversal day' pattern (higher high, lower close) and pulled back to the top of the 'ascending triangle' pattern on Thu.

The index bounced up after receiving good support from its rising 20 day EMA, but closed about 0.5% lower for the week. All three daily technical indicators are in bullish zones but showing a bit of downward momentum.

Expect some consolidation or a correction before bulls can resume control.

On longer term weekly chart (not shown), the index formed a weekly 'reversal bar' (higher high, lower close) but closed above its three weekly EMAs in a long-term bull market for the 16th week in a row. Weekly technical indicators are looking overbought and showing negative divergences by failing to touch new highs with the index.