During Mar '20, FIIs were net sellers of equity worth a humongous Rs 658.17 Billion. It was their highest monthly net selling ever - exceeding their previous highest monthly net selling (Jan '08) by more than 2.2 times. DIIs were net buyers of equity worth an enormous Rs 555.95 Billion. It was their highest monthly net buying ever - exceeding their previous highest monthly net buying (Oct '18) by more than 2.1 times, as per provisional figures.
Automobile sales during Mar '20 fell off a cliff. The de-growth was the worst ever. Combined passenger vehicle sales fell 51% compared with Mar '19 - with all major manufacturers declaring high double digit falls. Combined commercial vehicle sales crashed 89% YoY. (Growth in CV sales is one of the first signs of economic recovery. India seems very far away from that.)
Despite the revised estimate made in the budget, direct tax collections during FY 2019-20 fell short by Rs 1.42 Trillion from the revised estimate of Rs 11.7 Trillion, and was also lower than FY 2018-19 collection of Rs 11.17 Trillion.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex had formed a 'reversal day' bar (higher high, lower close) on Fri. Mar 27. That marked an intermediate top at 31126. Bears ruled on a holiday-shortened trading week. The index lost more than 2200 points (~7.5%) on a weekly closing basis. All three EMAs are falling, and the index is trading below them in a bear market.
Sensex is correcting the 11 year gain of some 34000 odd points from the Mar '09 low to the Jan '20 top. A 50% Fibonacci retracement is expected to drop the index to about 25100. (The index has already touched a low of 25639.)
What if 25100 gets breached? Sensex can fall to 21300 (61.8% Fibonacci retracement level). Will it? A lot will depend on what happens after the lockdown period in India ends on Apr. 14, and how soon the corona virus gets contained in USA and Europe.
Daily technical indicators are in bearish zones after correcting oversold conditions. MACD crossed above its signal line inside oversold zone, but its upward momentum has stalled. RSI is falling towards its oversold zone, after emerging from it. Slow stochastic has fallen sharply towards its oversold zone, hinting at some more near-term index correction.
Those with no prior experience of bear markets should not be in a hurry to enter the market, despite exhortations by experts and fund managers. In a bear market, smart investors make money by selling short - an activity best avoided by small investors. This bear market is not going to end in a hurry. Wait patiently for lower prices.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty touched a higher intra-week low after 6 weeks, but bulls need not feel too enthused about that. On a closing basis, the index touched a new 3 year low of 8084, and closed well below its 200 week EMA for the fourth straight week.
The 20 week EMA looks poised to cross below the 200 week EMA for the first time in 9 years. All three weekly EMAs are falling, which is a sign of a long-term bear market. However, the 'death cross' of the 50 week EMA below the 200 week EMA - which will technically confirm a long-term bear market - is awaited.
Weekly technical indicators are looking bearish and oversold. MACD is falling deeper inside its oversold zone. RSI is also falling further inside its oversold zone. Slow stochastic is about to enter its oversold zone. Any technical bounce may induce more bear selling.
Nifty's TTM P/E has moved down to 18.22, which remains above its long-term average. The breadth indicator NSE TRIN (not shown) has risen sharply into its oversold zone, hinting at some near-term index consolidation.
Bottomline? Sensex and Nifty charts have closed well below their respective 200 week EMAs for the fourth straight week. Both indices are in long-term bear markets. RBI's desperate interest rate cuts came too late to boost an economy that has been progressively devastated by shocks of demonetisation, unplanned GST implementation and now a virus lock-down. Small investors can continue with their SIPs, but should wait for the bear phase to play out.
FIIs continued their heavy net selling of equity during the week. Their total net selling was worth Rs 67.9 Billion. DIIs more than matched FII selling, but couldn't prevent sharp falls in Sensex and Nifty. Their total net buying was worth Rs 82.8 Billion, as per provisional figures.
The automobile sector remained in slide mode during Jul '19. Sales tumbled across categories due to weak consumer sentiment. Passenger vehicle sales fell over 30% - worse than the 24.6% fall back in Nov '08.
Gross GST collections during Jul '19 was Rs 1.02 Trillion - marginally up from Jun '19, and 5.8% higher than Jul '18 collection.
Nikkei India's Manufacturing PMI rose to 52.5% in Jul '19 from 52.1% in Jun '19. A figure above 50% indicates expansion. Growth was driven by domestic demand, while growth in export orders slowed to its lowest level in 15 months.
BSE Sensex index chart pattern
The following comment appeared in last week's post on the daily bar chart pattern of Sensex: "A breach of the 200 day EMA will be quite bearish, and can drop the index to the support zone between 35900 and 37100."
On Mon. Jul 29, the index breached its 200 day EMA intra-day, but bounced up to close above it. The next day, the index fell and closed below its 200 day EMA in bear territory.
On Wed. Jul 31, the index dropped to test support from the 37100 level and bounced up to test resistance from its 200 day EMA. The next day, Sensex fell and closed inside the support zone between 35900 and 37100.
On Fri. Aug 2, the index formed a 'reversal day' bar (lower low, higher close) and bounced up to close just above 37100 - giving some respite to bulls.
Note that Sensex appears to be in the midst of a 'broadening top' pattern, which has bearish implications. If the pattern plays out, there could be a rally that propels the index to a new high. But the subsequent correction can be devastating. So, trade at your own peril.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line towards its oversold zone. ROC is facing resistance from its 10 day MA after emerging from its oversold zone. RSI has re-entered its oversold zone after briefly emerging from it. Slow stochastic is trying to emerge from its oversold zone. A technical bounce is a possibility.
There were rumours in the market on Friday about the government considering some tax relief for FIIs, which set off short-covering in an oversold market. Remember the market adage: Buy the rumour; sell the news.
NSE Nifty index chart pattern
The following comment appeared in last week's post on the daily bar chart pattern of Nifty: "A breach of the 50 week EMA will be quite bearish, and can drop Nifty to the support zone between 10700 and 11100."
As expected, the breach of its 50 day EMA by the index dropped it further to close inside the support zone between 10700 and 11100.
During the past four months. Nifty appears to have formed a bearish 'broadening top' pattern. If the pattern plays out, a rally to a new high followed by a deeper correction may occur.
Weekly technical indicators are looking bearish and oversold. MACD has crossed below its signal line, and is falling rapidly in bullish zone. ROC faced resistance from its falling 10 week MA and has dropped inside its oversold zone. RSI and Slow stochastic have dropped to the edges of their respective oversold zones.
Nifty's TTM P/E has moved down to 27.09 - but remains above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has risen well inside its oversold zone, and can trigger a near-term index bounce.
Bottomline? Sensex and Nifty charts are testing long-term (3.5 yr) up trend lines (not shown). Breach of the trend lines can trigger bear phases and lower levels on both indices. Small investors should remain cautious and concentrate on wealth protection.
FIIs have stepped-up their selling. Their total net selling of equity during all three trading days this week was worth Rs 59.2 Billion. DIIs were net buyers of equity on all three days. Their total net buying more than matched FII selling, and was worth Rs 65.9 Billion, as per provisional figures.
Vehicle sales have continued to plummet for the past several months, as per Auto Component Manufacturers Association (ACMA) President. The current 15-20% production cut has led to a crisis-like situation, and about 1 Million employees may be laid off if the down trend continues.
The IMF lowered India's GDP growth estimate by 30 bps (0.3%) to 7% in 2019 and 7.2% in 2020 due to weaker-than-expected outlook for domestic demand. Despite the downward revision, India's growth rate will be the highest in the world.
Note the following remarks in last week's technical update on the daily chart pattern of Nifty: "After touching a lifetime high of 12103 on Jun 3, Nifty has formed a bearish pattern of 'lower tops, lower bottoms'. If the pattern continues to play out, further upside ought to be limited. The next leg of the down move should follow."
The expected down move turned out to be a vertical fall, as FIIs voted with their feet. Twin supports from the up trend line and the 200 day EMA (marked by grey oval) have been breached.
The previous occasion (in Feb '19) when Nifty fell below its 200 day EMA, the up trend line had provided support - allowing the index to bounce up. This time, the up trend line was breached first. As per 'trend line theory', a trend remains in force till it gets breached.
Today's breach of the 200 day EMA has not been a convincing one. The index recovered 40 points from its intra-day low - probably due to short-covering. That may give a faint ray of hope for bulls. However, the chart structure has turned bearish in the near-term as the 20 day EMA has crossed below the 50 day EMA and both EMAs are falling.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line and has slipped inside its oversold zone. RSI has dropped to the edge of its oversold zone. Slow stochastic has fallen deep inside its oversold zone, and may trigger a pullback towards the breached up trend line.
Nifty's TTM P/E has moved down to 27.62, but remains well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone - hinting at some near-term index downside.
Is Nifty falling into a bear market? Breach of the up trend line and the 200 day EMA is definitely a warning bell. A pullback above the up trend line (and the 11400 level) may keep bears at bay for a while.
However, bullish sentiment has taken a huge knock as realisation dawns on investors that this government neither cares about the state of the stock market, nor does it seem to have the knowledge or experience to turn around the slide in the economy.
WTI Crude Oil chart
The following comment appeared in the previous post on the daily bar chart pattern of WTI Crude Oil: "The imminent 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a bear market."
The 'death cross' (marked by grey oval) has ended the brief foray of oil's price into bull territory during Apr-May '19. The support zone between 50-52 has provided temporary solace to bulls.
Daily technical indicators are looking bearish and oversold. MACD is moving sideways below its signal line in oversold zone. RSI has emerged weakly from its oversold zone. Slow stochastic has dropped back inside its oversold zone.
All three EMAs are falling, and oil's price is trading below them in a bear market. Bears are likely to continue with their 'sell on rise' strategy.
On longer term weekly chart (not shown), oil's price has closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are in bearish zones, and showing downward momentum.
Brent Crude Oil chart
For the past two week's, the daily bar chart pattern of Brent Crude Oil has consolidated sideways in a range between 60-64. The 'death cross' of the 50 day EMA below the 200 day EMA (marked by grey oval) has technically confirmed a return to a bear market.
The support zone between 58-60 has helped oil's price to stabilise after a steep fall. However, it may only be a temporary respite for bulls. A slowing global economy will not be able to boost oil demand. Further downside is likely.
Daily technical indicators are looking bearish and oversold. MACD is moving sideways below its signal line in oversold zone. RSI has bounced up weakly from the edge of its oversold zone. Slow stochastic has dropped back inside its oversold zone.
On longer term weekly chart (not shown), oil's price closed below its three weekly EMAs in long-term bear territory for the third week in a row. Weekly technical indicators are in bearish zones, and showing downward momentum - hinting at some more consolidation or correction.
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 index chart pattern
The daily bar chart pattern of S&P 500 dropped below the 'rising wedge' and its 20 day EMA intra-day on Mon. May 6, but pulled back to close just inside the 'wedge' by the end of the day.
Bears took control on Tue. May 7. The index dropped sharply below its 20 day EMA and closed below it, but received good support from its 50 day EMA. The next day, the index traded below its 20 day EMA but above its 50 day EMA.
An intra-day fall below the 50 day EMA on Thu. May 9 was followed by a pullback and close above it. On Fri. May 10, the index formed an 'outside day' candlestick pattern (lower low, higher high), but failed to close above its falling 20 day EMA - losing 2.2% on a weekly closing basis.
Daily technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. RSI is trying to recover after falling below its 50% level. Slow stochastic has bounced up a bit from the edge of its oversold zone.
Friday's 'outside day' candlestick may be hinting at a continuation of the down trend that started after the index touched its lifetime high of 2954 on May 1.
Inconclusive US-China trade talks and increased US tariffs on Chinese imports should encourage bears to press home their advantage.
On longer term weekly chart (not shown), the index dropped to test support from its 20 week EMA, and closed above its three weekly 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 remarks were made in last week's post on the daily bar chart pattern of FTSE 100: "The index appears to be forming a large 'cup and handle' pattern, from which the likely breakout is upwards. The 'handle' of the 'cup' is in the process of getting formed... A fall below 7000 will negate the pattern."
The ongoing US-China trade war has affected bullish sentiment in global stock markets. FTSE succumbed to the bears - falling sharply below its 50 day EMA on Tue. May 7, but receiving brief support from its 200 day EMA.
On Thu. May 9, the index dropped below its 200 day EMA into bear territory but managed to cling on to the 7200 level by the end of the week - losing 2.4% on a weekly closing basis. The 'cup and handle' pattern has not been negated yet.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line in bearish zone. RSI is falling towards its oversold zone. Stochastic is inside its oversold zone, and can trigger a technical bounce.
On longer term weekly chart (not shown), the index closed just 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. MACD has started falling above its signal line in bullish zone. RSI has slipped below its 50% level. Stochastic is falling towards its 50% level.
WTI Crude Oil chart
The following comment was made in the previous post on the daily bar chart pattern of WTI Crude Oil: "Expect bears to remain in control despite the OPEC production cut because of demand slow down."
Though the 'death cross' (marked by grey ellipse) had technically confirmed a bear market, bulls tried for the better part of two weeks to put a floor on oil's price at 50.
Strong resistance from the plummeting 20 day EMA proved insurmountable. The temporary support at 50 was breached. Oil's price dropped sharply to close at 46.24 on Tue. Dec 18.
That was a signal for bulls to turn tail and run. Oil's price dropped to its lowest level in 18 months, and closed below 43.
Daily technical indicators are looking oversold and showing downward momentum. Slow stochastic is falling deeper inside its oversold zone. MACD and RSI are showing positive divergences by touching higher lows inside their respective oversold zones.
Some price consolidation can be expected, as bulls may try to defend the long-term support/resistance level of 42. If 42 gets breached, oil's price can drop towards 38.
On longer term weekly chart (not shown), oil's price closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are falling inside their respective oversold zones. The impending 'death cross' of the 50 week EMA below the 200 week EMA will technically confirm a long-term bear market.
Brent Crude Oil chart
The daily bar chart pattern of Brent Crude Oil shows the failure of a determined effort by bulls to defend the support level of 58. Strong resistance from the falling 20 day EMA put paid to bullish hopes.
Oil's price fell steeply to close below 51 - a level last touched back in Aug '17. Bears may not be done yet. If the long-term support at 50 gets breached, oil's price can drop to 45.
Daily technical indicators are showing downward momentum inside oversold zones. MACD and RSI are showing positive divergences by touching higher bottoms inside their respective oversold zones. Some price consolidation or pullback may be on the cards.
On longer term weekly chart (not shown), oil's price closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are falling inside their respective oversold zones. The 'death cross' of the 50 week EMA below the 200 week EMA will technically confirm a return to a long-term bear market.
WTI Crude Oil chart
Despite rumours of a production cut by Saudi Arabia, the daily bar chart pattern of WTI Crude Oil continued its steep correction from its Oct '18 top - touching a 52 week low of 50.10 on Nov 26, almost a 35% correction.
The 'death cross' of the 50 day EMA below the 200 day EMA (marked by grey oval) has technically confirmed a bear market. Bears have been using a 'sell on rise' strategy to devastating effect.
A production cut is expected when OPEC meets in Vienna next week amid worries over a US-China trade war, a supply glut and demand slowdown.
Daily technical indicators are looking quite oversold. MACD is falling below its signal line deep inside its oversold zone. RSI has remained inside its oversold zone since the beginning of Nov '18. Slow stochastic has remained inside its oversold zone for almost six weeks. All technical bounces are facing selling pressure.
On longer term weekly chart (not shown), oil's price closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking oversold. MACD is falling below its signal line in oversold zone. RSI is trying to emerge from its oversold zone. Slow stochastic is well inside its oversold zone, but has stopped falling.
Brent Crude Oil chart
The daily bar chart pattern of Brent Crude Oil has corrected 33% from its Oct 4 top, and plunged headlong into a bear market.
Oil's price touched a 52 week low of 58.40 on Nov 23, but bounced up to close above 60 on Nov 26. The imminent 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a bear market.
Daily technical indicators are looking quite oversold. MACD is falling below its signal line deep inside its oversold zone. RSI has remained inside its oversold zone for the past three weeks. Slow stochastic has remained inside its oversold zone for almost six weeks.
Bears have been using all technical bounces to sell, and may do so again. However, the price fall has been quite steep. Some consolidation around current levels - if not a rally - can be expected.
On longer term weekly chart (not shown), oil's price closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking bearish and oversold. MACD is below its signal line and has dropped to the edge of its oversold zone. RSI is trying to emerge from its oversold zone. Slow stochastic is well inside its oversold zone, but has stopped falling.
WTI Crude Oil chart
The following remarks were made in the previous post on the daily bar chart pattern of WTI Crude Oil: "...oil's price has been consolidating within a bearish 'flag' pattern. Some more consolidation/correction is likely."
The consolidation within the 'flag' (shaded on chart) didn't last long. A downward breakout on Oct 30 led to a sharp correction and a close below the 60 level for the first time in 8 months.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line in oversold zone. RSI is well inside its oversold zone. Slow stochastic has remained inside its oversold zone for a month.
The 20 day EMA has crossed below the 200 day EMA and is falling sharply. The 'death cross' of the 50 day EMA below the 200 day EMA seems imminent. That will technically confirm a bear market.
Saudi Arabia has signalled a production cut from Dec '18. Expect a near-term floor to the plummeting price of oil.
On longer term weekly chart (not shown), oil's price closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking quite bearish. MACD is falling below its signal line in bearish zone. RSI is falling towards its oversold zone. Stochastic has entered its oversold zone.
Brent Crude Oil chart
The following remarks were made in the previous post on the daily bar chart pattern of Brent Crude Oil: "On Oct 29, oil's price formed a 'reversal day' bar (higher high, lower close) that can lead to a correction towards the rising 200 day EMA."
The correction received only token support from the 200 day EMA. On Nov 1, oil's price formed a 'downward gap' and dropped below its 200 day EMA. A pullback attempt on Nov 5 was used by bears to sell. Oil's price closed just above 70.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line in oversold zone. RSI is well inside its oversold zone. Stochastic briefly emerged from its oversold zone, only to drop back inside it.
Oil's price is trading below its three EMAs in bear territory. The 20 day EMA is about to cross below the 200 day EMA. The 'death cross' of the 50 day EMA below the 200 day EMA - which will technically confirm a bear market - is awaited.
On longer term weekly chart (not shown), oil's price dropped below its 20 week and 50 week EMAs but manged to close just above its 200 week EMA in long-term bull territory. Weekly technical indicators are showing downward momentum. MACD is falling below its signal line and looks ready to enter bearish zone. RSI is falling below its 50% level. Stochastic has entered its oversold zone.
WTI Crude Oil chart
The daily bar chart pattern of WTI Crude Oil started correcting after touching a 52 week high of 76.90 on Oct 3. After receiving some support from its 50 day EMA, oil's price dropped sharply below its 50 day EMA on Oct 17.
Three days of sideways consolidation was followed by another sharp fall below its 200 day EMA on Oct 23. Since then, oil's price has been consolidating within a bearish 'flag' pattern. Some more consolidation/correction is likely.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line and entered its oversold zone. RSI is hovering just above its oversold zone. Slow stochastic is trying to emerge from its oversold zone.
The falling 20 day EMA has crossed below the falling 50 day EMA - like it did in Jun & Aug '18 - indicating near term bearishness. However, oil's price is trading just above its 200 day EMA, keeping bullish hopes alive.
On longer term weekly chart (not shown), oil's price bounced up after receiving support from its 50 week EMA, and closed above its 50 & 200 week EMAs in long-term bull territory. Weekly technical indicators are showing downward momentum. MACD is falling below its signal line in bullish zone. RSI and Slow stochastic are falling below their respective 50% levels.
Brent Crude Oil chart
Since touching a 52 week high of 86.74 on Oct 3, the daily bar chart pattern of Brent Crude Oil has undergone a sharp 13% correction. The 50 day EMA had provided some support on the downside.
However, on Oct 23, oil's price dropped below 76 followed by a further drop to 75.11 the next day. Since then, there has been a bit of a price recovery. On Oct 29, oil's price formed a 'reversal day' bar (higher high, lower close) that can lead to a correction towards the rising 200 day EMA.
Daily technical indicators are looking bearish and a bit oversold. MACD is falling below its signal line, and looks poised to enter its oversold zone. RSI is below its 50% level. Slow stochastic is trying to emerge from its oversold zone.
Oil's price is trading below its falling 20 day and 50 day EMAs - showing near term bearishness - but closed above its 200 day EMA in a bull market.
Rising global supply despite impending sanctions on Iran's oil exports, and weakness in global stock markets are contributing to bearish sentiments in the oil market.
On longer term weekly chart (not shown), oil's price dropped below its 20 week EMA after more than 2 months but manged to close above it, and well above its 50 week and 200 week EMAs in long-term bull territory. Weekly technical indicators are showing downward momentum. MACD is falling below its signal line in bullish zone. RSI and Slow stochastic are seeking support from their respective 50% levels.
S&P 500 index chart pattern
The following comments were made about the daily bar chart pattern of S&P 500 in last week's post: "...it formed an 'inside day' as well as a 'hammer' candlestick pattern. Bulls appear to be ready for a fight back."
The index dropped below its 200 day EMA on Mon. Oct 15, but managed to close above the support zone between 2737 and 2689 (the significance of these levels were mentioned in last week's post)
. It bounced up to touch an intra-day high of 2817 on Wed. Oct 17, but formed a bearish 'hanging man' candlestick pattern.
Bears used the opportunity to follow a 'sell on rise' strategy. The index dropped to seek support from its 200 day EMA, and closed flat for the week. (At the time of writing this post, the index is desperately trying to stay above its 200 day EMA - but for how much longer?)
Daily technical indicators are looking quite bearish. MACD is falling deeper inside its oversold zone. RSI and Slow stochastic emerged from their respective oversold zones but are moving downwards. Another likely breach of the 200 day EMA can lead to a fall towards the lower edge of the support zone.
On longer term weekly chart (not shown), the index remained below its 20 week EMA but closed above its 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are showing downward momentum. MACD is falling below its signal line in bullish zone. RSI is sliding down below its 50% level. Slow stochastic is about to enter its oversold zone.
FTSE 100 index chart pattern
The following comment appeared in last week's post on the daily bar chart pattern of FTSE 100: "Stochastic has stopped falling, and can trigger a technical bounce."
It turned out to be a weak bounce. On Mon. Oct 15, the index formed a small 'reversal day' bar (lower low, higher close) by touching an intra-day low of 6961 - its lowest level in 7 months - but closing higher at 7029.
That triggered a small rally, as the index formed a bullish pattern of 'higher tops, higher bottoms'. Bulls needn't get too excited, as the index appears to be forming a bearish 'flag' pattern.
Daily technical indicators are trying to correct oversold conditions. MACD is below its falling signal line in bearish zone, but seems to be forming a bullish 'rounding bottom' pattern. RSI has just emerged from its oversold zone. Stochastic is still inside its oversold zone.
FTSE gained about 0.8% on a weekly closing basis, but is trading below its three EMAs in a bear market. Any further attempt to rally may face resistance from the falling 20 day EMA.
On longer term weekly chart (not shown), the index formed a small 'reversal' bar and just managed to close above its 200 week EMA but well below its 20 week and 50 week EMAs. Weekly technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. RSI has emerged from its oversold zone. Stochastic is still inside its oversold zone.
FIIs were net sellers of equity on the first three trading days this week. Their total net selling was worth Rs 41.4 Billion. DIIs were huge net buyers on all three days. Their total net buying was worth Rs 53.9 Billion, as per provisional figures.
RBI announced it will inject Rs 120 Billion liquidity into the system through purchase of government bonds with maturity ranging from 2020 to 2030, to meet the festival season demand for funds.
The news soothed frayed nerves of bulls. The Rupee recovered from a record low against the US Dollar after six straight days of losses, and triggered a smart short-covering rally - particularly in stocks of NBFCs and banks.
The daily bar chart pattern of Nifty shows that the real damage to bullish sentiments occurred on Thu. Oct 4. The index not only dropped below its 200 day EMA into bear territory for the first time since Mar 19 '18, but did so with a downward 'gap' of 89 points (marked by grey rectangle on chart).
Such a downward 'gap' after a sharp correction has the hallmark of a 'runaway gap' - also called a 'measuring gap' because it tends to occur in the middle of a down move and therefore, has measuring implications.
The mid-point of the 'gap' is at 10800, which is about 950 points below the Sep 3 top of 11752. (Nifty had touched a higher top of 11760 on Aug 28, but the correction started from Sep 3.) So, 10800 - 950 = 9850 is the possible downside target for the index.
On Mon. Oct 8, Nifty touched an intra-day low of 10198, but formed a 'reversal day' bar (lower low, higher close) that set-off a technical bounce. Expect bears to start selling as the index moves up towards the 'gap' zone, which should act as a resistance in the near term.
Daily technical indicators are trying to correct oversold conditions. MACD is below its falling signal line deep inside its oversold zone, but its downward momentum has paused. RSI is trying to emerge from its oversold zone. Slow stochastic is rising inside its oversold zone. A pullback towards the zone between 10600 and 10700 appears likely.
Nifty's TTM P/E has moved down to 25.3, but still remains higher than its long-term average. The breadth indicator NSE TRIN (not shown) is moving down in neutral zone, hinting at some more upside.
All three EMAs are moving down, and the index is trading below them in bear territory. It is too early to call this correction the first leg of a bear market. Technical confirmation will be provided by the 'death cross' of the 50 day EMA below the 200 day EMA, and a 20% fall from the Aug 28 top of 11760 (to 9400).
