Nifty chart: a midweek technical update (May 15, 2019)

FIIs were net sellers of equity on all three trading days this week. Their total net selling was worth Rs 42.1 Billion. DIIs were net buyers of equity on all three trading days. Their total net buying was worth Rs 39.7 Billion, as per provisional figures.

India's CPI based retail inflation inched up to 2.92% in Apr '19 against 2.86% in Mar '19, but remained well within RBI's target level of 4%.

However, WPI based wholesale inflation slipped to 3.07% in Apr '19 against 3.18% in Mar '19 due to lower cost of fuel and manufactured items, even as food prices rose higher.

The following comments appeared in last week's technical update on the daily bar chart pattern of Nifty: "On the downside, there is an unfilled upward 'gap' of 46 points (formed on Mar 12). Expect Nifty to find some support at the 'gap' zone." 

On Mon. May 13, the index fell more than 130 points - completely filling the 'gap' by closing below it. Short covering after 9 days of correction led to a pullback above, and a close at, the upper edge of the 'gap' on Tue. May 14.

Bullish hopes were dashed as Nifty dropped to close below the 'gap' for the second time on Wed. May 15. Effectively, the index oscillated about the 'gap' within a 200 points range (between 11300 and 11100) during the past three trading sessions.

What next? Note that the index formed an 'inside day' candlestick (lower high, higher low) on May 15, which indicates indecision among bulls and bears and often leads to a continuation of the current trend.

The way FIIs are fleeing the Indian market, there is every possibility of a test, and likely breach, of the 200 day EMA. Expect bulls to strongly defend the 200 day EMA.

Daily technical indicators are looking bearish and oversold. MACD is falling deep inside bearish zone. RSI has bounced up weakly from the edge of its oversold zone. Slow stochastic is moving sideways with a slight upward bias inside its oversold zone.

Remember that an index (or stock) can remain oversold for long periods - though it hasn't happened for Nifty in a long while. 

Nifty's TTM P/E has moved down to 27.82, but remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has risen sharply inside its oversold zone, and may trigger a near-term technical bounce.

FIIs are worried about the US-China trade tiff. They may have also been spooked by the way opposition leaders are meeting and talking about forming the next government. 

If the NDA manages to get past the finishing post first on May 23, bulls will celebrate. However, their celebrations should be tempered with the reality of weak Q4 earnings reports from India Inc., and visible signs of an economic slowdown. 

S&P 500 and FTSE 100 charts (Dec 21, 2018): bears have total control

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 shows how technical analysis signals can sometimes be self-fulfilling. The index made a strong 62% gain (~1131 points) during its 33 months long rally from the Feb 11 '16 low of 1810.10 to the Sep 21 '18 top of 2940.91.

Almost half of those gains (532.36 points; 47%) got wiped out in just 3 months when the index touched an intra-day low of 2408.55 on Dec 21 '18. Note how the bottom seems to have fallen out of the index after the bearish 'death cross' (of the 50 day EMA below the 200 day EMA) on Dec 10th.

Daily technical indicators are looking oversold. MACD is falling deep inside its oversold zone. RSI is also falling inside its oversold zone. Slow stochastic has dropped well inside its oversold zone. Bears have taken complete control of the chart.

The 50% Fibonacci retracement level of the 33 months long rally (from Feb '16 low to Sep '18 top) is at 2375. Expect bulls to put up a fight to defend that level. But the fight may not last long when bears are on the rampage.

On longer term weekly chart (not shown), the index dropped to test support from its 200 week EMA for the first time since Feb '16. A spike in trading volumes is possibly an indication of a 'selling climax'. A technical bounce may follow. Weekly technical indicators are looking oversold and showing negative divergences by falling below their Feb '16 lows. 

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 continued its corrective move, and touched a 2 years low of 6646 on Thu. Dec 20 but managed to close above 6700. 

On Fri. Dec 21, the index formed an 'inside day' candlestick pattern (lower high, higher low) - which indicates indecision among bulls and bears - and closed slightly higher. On a weekly closing basis, the index lost 124 points (1.8%).

BrExit uncertainty is increasing by the day, and the British PM's prospects of getting her BrExit deal through Parliament are looking bleak.

Daily technical indicators are bearish. MACD is sliding down below its signal line in bearish zone. RSI is falling below its 50% level. Stochastic is inside its oversold zone. 

All three indicators showed positive divergences by not falling lower with the index. But don't expect a rally anytime soon, as bears are selling on every rise.

On longer term weekly chart (not shown), the index closed below its three weekly EMAs in long-term bear territory, but appears to have found temporary support at 6700. Weekly technical indicators are bearish and showing downward momentum. MACD and Stochastic are falling inside their respective oversold zones. RSI is seeking support from the edge of its oversold zone.

(Wishing all blog followers, visitors, subscribers, twitter followers Season's Greetings and a very happy and prosperous New Year.)   

S&P 500 and FTSE 100 charts (Oct 12, 2018): bears force bulls on the ropes

S&P 500 index chart pattern

Possibility of some more correction was mentioned in last week's post on the daily bar chart pattern of S&P 500. Yet, the vicious bear attack on Wed. & Thu. (Oct 10 & 11) seemed to catch bulls unawares.

The index fell vertically to close below its 200 day EMA for the first time in 6 months. By touching an intra-day low of 2710 on Oct 11, the index dropped into the support zone between 2737 and 2689 (which are the 50% and 61.8% Fibonacci retracement levels respectively of the 408 points rally from the Feb 9 low of 2533 to the Sep 21 top of 2941).

Volume spikes on Wed. & Thu. may be the sign of a 'selling climax'. On Fri. Oct 12, the index bounced up to close above its 200 day EMA in bull territory. In the process, it formed an 'inside day' as well as a 'hammer' candlestick pattern. Bulls appear to be ready for a fight back.

Daily technical indicators are looking oversold. MACD and Slow stochastic are falling deeper inside their respective oversold zones. RSI is trying to emerge from its oversold zone, and can trigger a pullback towards the 2800-2850 zone. 

On longer term weekly chart (not shown), the index fell below its 50 week EMA intra-week for the first time since Apr '18, but closed above its 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are showing downward momentum. MACD and Slow stochastic are falling in bullish zones. RSI has dropped below its 50% level.  

FTSE 100 index chart pattern

The bottom seems to be falling out of the daily bar chart pattern of FTSE 100. Bulls were helpless against aggressive bears, as the index closed more than 320 points (4.4%) lower for the week.

All three EMAs are falling, and the index is trading below them in a bear market. A test of the Mar '18 low is on the cards. (At the time of writing this post, the index is correcting further.)

Daily technical indicators are looking oversold. MACD and RSI are falling deeper inside their oversold zones. Stochastic has stopped falling, and can trigger a technical bounce.

On longer term weekly chart (not shown), the index closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking bearish and showing downward momentum. MACD and RSI are falling towards their respective oversold zones. Stochastic is inside its oversold zone.