FIIs were net buyers of equity on Mon. and Wed. (Nov 9 and 11), but were net sellers on Tue. (Nov 10). Their total net buying was worth Rs 7.0 Billion. DIIs were net buyers of equity on all three trading days. Their total net buying was worth Rs 6.5 Billion, as per provisional figures.
India's electricity demand fell 4.3% to 94.6 Billion units in Nov '19 against 98.84 Billion units in Nov '18. It was the fourth straight month of power demand decline, as per CEA. Power demand had declined 13.2% YoY in Oct '19 - the steepest monthly decline in more than 12 years, reflecting a deepening growth slowdown.
ADB has slashed India's GDP growth forecast to 5.1% in FY 2019-20 from 6.5% that was forecast earlier. For FY 2020-21, GDP growth forecast has been cut to 6.5% from 7.2% on the back of risk aversion, credit crunch, slumping consumption and rural distress.
The daily bar chart pattern of Nifty has been correcting after touching a new high of 12158.80 on Nov 28 and penetrating the upper Bollinger Band. The correction has dropped the index below the middle band (20 day SMA, marked by green dotted line).
Note that the lower Bollinger Band is at 11819 and the rising 50 day EMA is at 11777. The zone between 11777 and 11819 should provide good support to the index on the downside.
Daily technical indicators are looking bearish to neutral. MACD is moving down below its falling signal line in bullish zone. RSI is exactly at its 50% level. Slow stochastic has dropped inside its oversold zone, and may have triggered today's pullback past 11900.
Nifty's TTM P/E has slipped down to 27.76, which remains well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is falling inside oversold zone, hinting at some near-term index upside.
The index may be forming a 'head and shoulders' reversal pattern with a 'neckline' at 11800. The left 'shoulder' and 'head' have formed already. A technical bounce towards 12000 followed by a fall towards 11800 will complete the right 'shoulder' formation.
The right 'shoulder' hasn't formed yet - and may not form at all. However, the possibility of formation of a known reversal pattern should be treated with respect and caution. In case the pattern does play out, Nifty can move down to test support from its 200 day EMA.
FIIs were net buyers of equity on Thu. Dec 5, but net sellers on the other four trading days. Their total net selling was worth Rs 38.6 Billion. DIIs were net sellers of equity on Thu. Dec 5, but were net buyers on the other four days. Their total net buying was worth Rs 24.2 Billion - as per provisional figures.
According to ACMA, auto component sales during Apr-Sep '19 declined 10% YoY to Rs 1.79 Trillion. However, exports grew 3% to Rs 514 Billion, and after-market sales grew 4% to Rs 351 Billion.
As per a Dun & Bradstreet report, India's GDP growth is expected to remain subdued in the near future as the slowdown has deepened and is likely to remain extended for a longer period than previously anticipated.
BSE Sensex index chart pattern
After touching lifetime intra-day and closing highs on Thu. Nov 28, the daily bar chart pattern of Sensex has been in a corrective mode. Profit booking often follows a new index top. Negative divergences visible on all four technical indicators - which failed to touch new tops - had also hinted at some consolidation or correction.
The index is trading well above its rising 200 day EMA in a bull market, but closed below its 20 day EMA for the first time in two months. The long-term technical structure of the index remains bullish. However, formation of back-to-back 'rounding top' patterns is a matter of concern for those holding long positions.
Daily technical indicators are looking bearish to neutral. MACD is falling below its signal line in bullish zone. ROC has dropped to its '0' line. RSI and Slow stochastic are seeking support from their respective 50% levels. Some more near-term index correction or consolidation may follow.
The stock market had expected a 25 bps (0.25%) interest rate cut by RBI on Dec 5. By maintaining status quo and downgrading full year GDP growth, RBI stated the obvious: monetary policy alone is not going to solve the growth problem. Instead of fiscal easing that could have boosted growth, there is talk about increasing GST tax rates, which will further burden consumers. Go figure!
Sensex may be in the process of forming a 'head and shoulders' reversal pattern, with a 'neckline' at 40000. The left 'shoulder' and 'head' have formed already - but the right 'shoulder' is yet to take shape. If the pattern does play out, the minimum downside target will be 38900.
Small investors would do well to sit on the sidelines and avoid value-buying in mid-cap and small-cap stocks.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty failed to close above its previous (Jun 7) top of 12103. That was just the excuse that bears needed to go on the attack. The index lost about 135 points (1.1%) on a weekly closing basis, but traded well above its three rising EMAs in a long-term bull market.
Note that the index has formed a bullish pattern of 'higher tops, higher bottoms' during the past two years - keeping alive the long-term bull market. However, after each of the three previous index tops - in Feb '18, Aug '18, Jun '19 - Nifty corrected 11-15%. A pattern repeat can drop the index below 10800.
Weekly technical indicators are showing bearish signs. MACD is above its rising signal line in bullish zone, but its upward momentum has stalled. ROC has crossed below its 10 week MA, and dropped down from its overbought zone. RSI is seeking support from the edge of its overbought zone. Slow stochastic is moving sideways with a downward bias inside its overbought zone. Some more index correction or consolidation is possible.
Nifty's TTM P/E has moved down to 27.78 - but remains well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) is rising sharply inside its oversold zone, and may limit near-term index downside.
Bottomline? Sensex and Nifty charts are undergoing corrections after touching lifetime highs. FIIs have started selling. Caution is advised due to the poor GDP number and a crisis of confidence among consumers.
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.
FIIs were net buyers of equity on Tue. (Jun 18), but net sellers on the other four days. Their total net selling was worth Rs 15.7 Billion. DIIs were net sellers of equity on Wed. (Jun 19), but net buyers on the other four days. Their total net buying was worth Rs 30.2 Billion, as per provisional figures.
USA has warned that it would be compelled to take some "additional action" against India over "unfair" trade practices as the two countries have made "no headway" on these issues.
Sovereign Wealth funds and State Pension funds are piling into India, buying stakes in everything from airports to renewable energy, attracted by political stability, reforms and a growing middle class.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex consolidated sideways during the week - getting good support from its 50 day EMA - but lost about 250 points (0.6%) on a weekly closing basis. The index is trading well above its rising 200 day EMA in a bull market.
However, on the closing (line) chart (see below), the index had broken out below a small 'head and shoulders' reversal pattern (with purple neckline), followed by a pullback towards the purple neckline - and may be forming a larger complicated 'head and shoulders' pattern with a green neckline.
Why complicated? Because the 'head' of the larger 'head and shoulders' pattern is itself a 'head and shoulders' pattern. Note that the green neckline has not been breached yet. Bulls can be expected to put up a strong defense here.
What if the green neckline gets breached? The larger complicated 'head and shoulders' pattern will get technically confirmed. Sensex can then be expected to move down to test support from its rising 200 day EMA.
Daily technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. ROC faced resistance from its '0' line and dropped back into bearish zone. RSI is below its 50% level. Slow stochastic has emerged weakly from its oversold zone.
Some more correction, and a part or complete filling of 'Gap 2' (formed on May 20) may be on the cards.
Formation of a reversal pattern - specially one occurring near a lifetime high - should be treated with respect and caution. The up trend from the Oct '18 low and the bull market are intact. So, there is no need to sell in a panic. But buying can be restricted for the time being.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty closed lower for the third week in a row as it dropped down to test support from the upward 'gap' formed on May 20. The index closed above its weekly EMAs in a bull market, but has formed a 'rounding top' reversal pattern.
Weekly technical indicators are looking bearish. MACD is about to fall from its overbought zone. ROC is below its 10 week MA and has fallen to its neutral zone. RSI and Slow stochastic have dropped from their respective overbought zones. Some more consolidation or correction is possible.
After touching a high of 29.90 on Mon. Jun 3, Nifty's TTM P/E has moved down to 28.99, which is still well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped sharply inside its oversold zone. Some near-term index upside or consolidation is likely.
Bottomline? Sensex and Nifty charts are consolidating after touching lifetime highs, but showing some bearish reversal signs. Any pre-budget rally can be used to book profits. Avoid the urge to do bottom fishing among small/mid caps.
S&P 500 index chart pattern
The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "The week's rally was accompanied by sliding volumes. A pullback towards the down trend line is a possibility."
The index touched an intra-day high of 2911 on Tue. Jun 11, but pulled back towards the (purple) down trend line, forming a 'reversal day' bar (higher high, lower close).
A sideways consolidation in a range of 20 points (2875 - 2895) followed. The index closed above its three EMAs in a bull market, and eked out a 0.5% weekly gain.
Daily technical indicators are in bullish zones, but not showing any upward momentum. MACD has crossed above its signal line to enter bullish zone. RSI is moving sideways above its 50% level. Slow stochastic is moving sideways inside its overbought zone.
Some more consolidation is possible before the index attempts to scale a new high.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market, but formed a 'doji' candlestick indicating indecision among bulls and bears. Weekly technical indicators are looking bullish to neutral. MACD is moving sideways below its signal line. RSI has moved above its 50% level after falling below it. Slow stochastic has moved up to its 50% level after falling below it.
FTSE 100 index chart pattern
The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: "Near-term index upside may be limited. Sliding volumes during last week's rally can encourage bears to 'sell on rise'."
The index touched an intra-day high of 7421 and closed just below 7400 on Tue. Jun 11 - negating the bearish 'head and shoulders' pattern (refer last week's post). Bulls failed to press home their advantage, and bears stepped in to sell as expected.
The index received support from its 20 day EMA, and closed above its three EMAs in bull territory. Strong volumes on the two down days indicate bears are in no mood to give up without a fight.
Daily technical indicators are in bullish zones but showing downward momentum. MACD crossed above its signal line to enter bullish zone, but is turning down. RSI is falling towards its 50% level. Stochastic has slipped down from its overbought zone.
A fall and a test of support from the 200 day EMA may be on the cards.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory, but formed a 'shooting star' candlestick pattern that can trigger some correction or consolidation . Weekly technical indicators are in bullish zones, but not showing any upward momentum.
S&P 500 index chart pattern
The following remark appeared in last week's post on the daily bar chart pattern of S&P 500: "As long as the index trades above its 200 day EMA, bulls need not worry too much."
It is time for bulls to start worrying. The index successfully tested support from its 200 day EMA on May 29 and 30, but the support was breached on Fri. May 31.
The index formed a small (8 points) downward 'gap' below its 200 day EMA, and closed in bear territory for the first time in four months. Support at the 2750 level may not hold for long, as strong volumes on recent down days indicate bears are regaining control.
Daily technical indicators are in bearish zones, and showing downward momentum. MACD is falling below its signal line. RSI has dropped down to the edge of its oversold zone. Slow stochastic sliding deeper inside its oversold zone.
Some more correction, and a drop towards the support zone between 2700-2725 is likely. The (purple) down trend line has dominated the chart during the entire month.
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 looking bearish, and showing downward momentum - hinting at more correction.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 has slipped into bear territory by closing below its three daily EMAs. What had seemed like the 'handle' of a 'cup and handle' pattern is turning into a bearish 'head and shoulders' reversal pattern with a 'neckline' at 7200.
Daily technical indicators are in bearish zones and showing downward momentum. MACD has crossed below its signal line. RSI is falling below its 50% level. Stochastic has entered its oversold zone.
Some more correction is likely - which will negate the 'cup and handle' pattern (refer last week's post).
On longer term weekly chart (not shown), the index closed below its merged 20 week and 50 week EMAs, but above its 200 week EMA in long-term bull territory. Weekly technical indicators are looking bearish, and showing downward momentum.
FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 26.3 Billion. DIIs were net sellers of equity on Mon. & Tue. (Mar 25 & 26) but net buyers today. Their total net selling was worth Rs 0.74 Billion, as per provisional figures.
According to ICRA, Indian basmati rice exports may touch an all-time high of Rs 300 Billion in FY 2018-19, on the back of strong demand from Iran and firming up of prices. The previous highest export figure was Rs 293 Billion in FY 2013-14.
A consortium of Tata Group, GIC (Singapore's sovereign wealth fund) and SSG Capital Management will invest Rs 80 Billion to buy a stake in GMR Airports Ltd, which is a unit of GMR Infrastructure Ltd. GMR operates airports at Hyderabad, Delhi, Cebu (Philippines), and is building airports at Goa and Crete (Greece).
Note the following comments from the previous technical update on the daily bar chart pattern of Nifty: "The index is just 400 points away from its lifetime high. Charts tend to have 'memory'. Profit booking can emerge as the index approaches 11760."
The index had touched an intra-day high of 11573 on Fri. Mar 22 - moving above the upper edge of the upward-sloping trading channel. It closed 116 points lower due to profit booking, and formed a bearish 'reversal day' bar (higher high, lower close).
Nifty opened with a downward 'gap' and touched an intra-day low of 11311, as profit booking continued when trading resumed on Mon. Mar 25. A pullback towards the upper edge of the trading channel during the next two days touched a lower top of 11546 today.
The index closed 101 points lower to form another 'reversal day' bar (higher high, lower close) even though FIIs and DIIs were both net buyers today. A fall to test support from the 46 points upward 'gap' formed on Mar 12 is a possibility.
Daily technical indicators are correcting overbought conditions. MACD is falling towards its rising signal line inside its overbought zone. RSI and Slow stochastic have slipped down from their respective overbought zones - hinting at some more correction.
All three EMAs are rising, and Nifty is trading above them in a bull market. It should be just a matter of time before the index rises to touch a new high. However, bears are putting up a stiff fight to defend the upper edge of the trading channel. Further upward progress may be slow.
Nifty's TTM P/E is at 28.05, which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has received support at the edge of its overbought zone. Some consolidation or correction may follow.
On a longer-term weekly line chart (not shown), Nifty may be forming a large 'head and shoulders' reversal pattern, with a neckline at 10000. Such a pattern will get technically confirmed only if the index falls below 10000. A move above the lifetime high of 11760 - touched in Aug '18 - will negate the pattern.
If FIIs keep buying, a fall below 10000 will remain a distant dream. However, it is prudent to respect a large reversal pattern - till the pattern gets negated.
FIIs were net buyers of equity on Fri. (Jan 25) but net sellers on the first four trading days. Their total net selling was worth Rs 5.6 Billion. DIIs were net sellers of equity on Tue. and Fri., but net buyers during Mon., Wed. and Thu. (Jan 21, 23 and 24). Their total net buying was worth Rs 12.6 Billion, as per provisional figures.
India Inc's profit-to-GDP ratio (for Nifty 500 index companies) dropped to a 15 years low of 2.8% in FY '18 from 5.5% in FY '08, as per a study by Motilal Oswal. For all companies (including unlisted ones), profit-to-GDP ratio declined from 7.8% to 3% in the same period.
India's exports to China increased from US $6.37 Billion during Jun-Nov '17 to US $8.46 Billion during Jun-Nov '18 - benefitting from the ongoing tariff war between USA and China.
BSE Sensex index chart pattern
The following comment was made in last week's post on the daily bar chart pattern of Sensex: "By failing to press home their advantage following the upward breakout, bulls have left the door open for a possible 'false' upward breakout."
After making a smart start to the week by touching a high of 36701 intra-day on Mon. Jan 21 and closing at the highest level in 3 months, the index dropped below its 20 day EMA by the end of the week - losing 1% on a weekly closing basis.
The upward breakout from the 'diamond' pattern had lacked volume confirmation, and has turned into a false breakout.
Sensex closed more than 500 points above its 200 day EMA in bull territory. It has been trading above its long-term moving average for the past 4 weeks. However, caution is advised for those holding long positions.
Any fall below the 200 day EMA can lead to a deeper correction, and a likely test of its Oct '18 low of 33292. Expect bulls to put up a fight to defend the long-term moving average.
Daily technical indicators are looking neutral to bearish. MACD has slipped below its signal line in bullish zone. ROC has dropped below its 10 day MA in neutral zone. RSI is falling towards its 50% level. Slow stochastic has fallen below its 50% level. Some more correction seems likely.
F&O expiry on Jan 31 and interim budget on Feb 1 are important events next week. The ED and CBI appear to have suddenly gone on nationwide overdrive. That may crush bullish hopes of an already jittery market.
A lot will depend on FIIs. They turned net buyers on Fri. Jan 25, and can help to prop up the market.
NSE Nifty index chart pattern
The following comments appeared in last week's post on the daily bar chart pattern of Nifty: "Note that there was no significant increase in trading volumes, which is required to technically confirm an upward breakout. The fact may encourage bears to mount an attack and turn the upward breakout into a 'false' one."
Bears acted as expected. The index formed a weekly 'reversal' bar (higher high, lower close) and dropped to seek support from its 20 week EMA - losing almost 1.2% on a weekly closing basis.
Nifty closed above its 50 week and 200 week EMAs in a long-term bull market. However, a correction towards the Fibonacci support zone between 10283 and 9827 remains a possibility.
Weekly technical indicators are looking bullish to neutral. MACD is moving sideways above its signal line in neutral zone. ROC has formed a 'head-and-shoulders' reversal pattern and crossed below its 10 week MA in neutral zone. RSI is moving sideways above its 50% level. Slow stochastic has entered its overbought zone after four months.
After touching a high of 26.54 on Tue. Jan 22, Nifty's TTM P/E has moved down to 26.14, but remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is moving down in neutral zone. Some correction or consolidation is possible.
Bottomline? Sensex and Nifty charts had broken out above 'diamond' patterns, but the breakouts have turned out to be false ones. Both indices are trading above their long-term moving averages in bull territories. Corrective down moves from Aug '18 tops can restart at any time. FII buying may help prevent such an occurrence.
FIIs were net buyers of equity on Mon. and Wed. (Jan 7 and 9) but net sellers on the other three days during the week. Their total net selling was worth Rs 5.7 Billion. DIIs were net sellers of equity on Mon., but net buyers on the other four days. Their total net buying was worth Rs 11.3 Billion, as per provisional figures.
India's IIP (Index of Industrial Production) dropped to a disappointing 17 months low of 0.5% in Nov '18 from an upwardly-revised 8.4% in Oct '18, due to a high base effect and a contraction in manufacturing growth. The previous low of 0.3% occurred in Jun '17 (a month before GST introduction).
BSE Sensex index chart pattern
The bearish 'rising wedge' pattern (refer last week's post) on the daily bar chart pattern of Sensex has morphed into a 'diamond' pattern, which usually has bearish implications. In other words, the likely breakout from the pattern is downwards.
Since a 'diamond' - a somewhat rare pattern - tends to be a reversal pattern that forms at a market top (refer this post), its formation was ignored earlier. But now it has become visibly obvious that Sensex has been consolidating within a 'diamond' during the past 10 weeks or so.
Since a 'diamond' can sometimes be a continuation pattern, an upward breakout can't be ruled out. The index has closed above its three EMAs in bull territory with a 0.9% weekly gain. That gives bulls a slight advantage.
Note that a 'diamond' can be viewed as a 'head and shoulders' reversal pattern with a bent 'neckline'. In this case, the 'head' is actually a bearish 'double top' reversal pattern with two left and two right 'shoulders'.
A 'diamond' starts out as a bearish 'broadening top', which is followed immediately by a 'symmetrical triangle' pattern. The eventual breakout follows the 'rules' of a breakout from a 'triangle'.
That means, all four possibilities are on the table - a downward breakout, an upward breakout, a 'false' upward/downward breakout, and a sideways move through the right 'apex' of the 'diamond' that negates the pattern. (Hope you are not thoroughly confused!)
Remember that the 'height' of the 'diamond' (~2300 points on Sensex chart above) should be added/subtracted to the breakout point to set the upward/downward target. Wait for the breakout before taking a buy/sell decision.
Daily technical indicators are giving conflicting signals, which is often the case during periods of consolidation. MACD is facing resistance from its gradually sliding signal line in bullish zone. ROC is about to cross below its 10 day MA in neutral zone. RSI has moved above its 50% level. Slow stochastic is rising towards its overbought zone.
Of the few Q3 (Dec '18) results announced so far, TCS has met expectations but Infosys has slipped badly. IndusInd and Bandhan Bank have shown downward pressure on margins due to large provisions for IL&FS loans.
The macroeconomic environment is favouring bears again. Oil's price has started to rise. The Rupee is slipping against the US Dollar. After weak auto sales growth in Dec '18, the shock of the dreadful IIP number in Nov '18 may be the proverbial straw that breaks the back of bulls.
NSE Nifty index chart pattern
The bearish 'rising wedge' pattern on the weekly bar chart pattern of Nifty has been replaced by a visibly obvious 'diamond' pattern. The 'diamond' is usually a 'reversal' pattern. That means the likely breakout from the pattern is downwards. (Read gory details about the 'diamond' pattern in Sensex post above.)
A 'diamond' has measuring implications. The 'height' of the 'diamond' (~700 points on Nifty chart above) should be added/subtracted to the breakout point to set the upward/downward target. Wait for the breakout before taking a buy/sell decision.
Weekly technical indicators are giving conflicting signals. MACD has merged with its signal line, and is moving sideways just below its '0' line. ROC has dropped sharply from its overbought zone. RSI has moved above its 50% level. Slow stochastic is rising towards its overbought zone.
Nifty's TTM P/E is at 26.00, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising in neutral zone, hinting at near-term index correction.
Bottomline? Sensex and Nifty charts have been consolidating within 'diamond' patterns for the past 10 weeks. Breakouts from the patterns appear imminent. Remember that an upward breakout should be accompanied by a volume surge. A downward breakout doesn't require volume support for confirmation. Wait for the breakout before initiating any buy/sell decisions.
(Note: Markets fluctuate, but there are always opportunities if you know where to look. Learn how to choose fundamentally strong stocks. Become a paid subscriber of my Monthly Investment Newsletter. A limited number of new subscriptions are being offered till Jan 21, 2019. Enrollments have started. Contact me for details: mobugobu@yahoo.com.)
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: "Despite trading near a lifetime high, the index is facing difficulty in shaking the bears off...A correction towards the lower Bollinger Band remains a possibility."
The index touched the upper Bollinger Band twice - on Mon. (Oct 1) and Wed. (Oct 3) - but corrected sharply below its 20 day SMA (dotted line) to the lower Bollinger Band by Fri. (Oct 5). The index bounced up a bit after receiving good support from its 50 day EMA, but lost about 1% on a weekly closing basis.
The previous occasion when the index dropped to touch the lower Bollinger Band was more than 3 months ago (in end-Jun '18). The index had then consolidated sideways before resuming its up trend. Will the pattern repeat this time? The fact that the index took just a week to wipe out all gains made during the previous three weeks is hinting at a bear resurgence.
Daily technical indicators are looking bearish and showing downward momentum. MACD is falling below its signal line in bullish zone. RSI and Slow stochastic have dropped below their respective 50% levels after forming 'head and shoulders' reversal patterns. Some more correction can't be ruled out.
On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are suggesting a correction towards its rising 20 week EMA. MACD and Slow stochastic are correcting overbought conditions. RSI is falling in bullish zone.
FTSE 100 index chart pattern
The following comments were made in the previous post on the daily bar chart pattern of FTSE 100: "The three EMAs are converging - a technical condition that is usually a harbinger of a sharp up or down move."
The sharp move occurred downwards - below all three EMAs into bear territory once again. The index managed to close above 7300, but lost more than 190 points (2.5%) on a weekly closing basis.
Daily technical indicators are looking bearish and showing downward momentum. MACD has crossed below its signal line in bearish zone. RSI has dropped below its 50% level. Stochastic has entered its oversold zone, and can trigger a pullback. (At the time of writing this post, the index has slipped below the 7300 level.)
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 a long-term bull market. Weekly technical indicators are looking bearish and showing downward momentum. MACD is falling below its signal line in bearish zone. RSI is falling below its 50% level. Stochastic has entered its oversold zone.
