FIIs were net buyers of equity for the second month in a row during Nov '19. Their total net buying was worth Rs 129.2 Billion - their highest monthly net buying since Apr '19. DIIs were net sellers of equity during Nov '19. Their total net selling was worth Rs 79.7 Billion - their highest monthly net selling since Apr '19.
India's GDP grew 4.5% during Q2 (Sep '19) against 7% during Q2 (Sep '18) - its slowest growth rate in more than 6 years - due to degrowth in manufacturing and a drop in exports. GDP grew 4.8% in H1 (Sep '19) against 7.5% in H1 (Sep '18).
India's fiscal deficit during Apr-Oct '19 was Rs 7.2 Trillion, which is 102.4% of the budgeted target of Rs 7.03 Trillion for FY 2019-20. Net tax receipts during Apr-Oct '19 was Rs 6.83 Trillion while total expenditure was Rs 16.55 Trillion.
BSE Sensex index chart pattern
After an upward breakout above the 39450 level on Oct 29, the daily bar chart pattern of Sensex entered a period of sideways consolidation within a 'rectangle'. An expected upward breakout from the 'rectangle' occurred on Nov 25 '19.
The index then rose to touch new intra-day (41164) and closing (41130) highs on Thu. Nov 28. Profit booking on Fri. Nov 29 caused a pullback to the top of the 'rectangle'.
All three EMAs are rising, and the index is trading above them in a bull market. The pullback is providing an opportunity to add. However, some consolidation or correction may follow as all four technical indicators are showing negative divergences by failing to touch new highs with the index.
Daily technical indicators are not showing upward momentum. MACD has crossed below its signal line and has slipped down from its overbought zone. ROC has dropped to seek support from 10 day MA in neutral zone. RSI is moving sideways above its 50% level. Slow stochastic is moving sideways inside its overbought zone.
The index has been rallying for the past two months on the back of FII buying. The poor GDP growth number appears to have been 'discounted' by the stock market. Traders and investors are hoping for more reforms by the government to kick-start the economic growth engine.
However, such hopes may be belied. The current dispensation is still in denial about the extent of the economic slowdown, and does not seem to have a clear plan of action that can stimulate investments and consumption. The corporate tax cut may get used to clean up account books.
At or near an all-time index high, small investors should always remember Falstaff's statement to King Henry IV: Discretion is the better part of valour.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty broke out above the previous three weeks' consolidation range, and touched new intra-week (12159) and closing (12056) highs. The index gained about 140 points (1.2%) for the week, and closed well above its three rising EMAs in a long-term bull market.
Note that the index is yet to close above its previous (Jun 7) top of 12103, but that is a small hurdle that bulls should be able to jump over easily. That does not mean small investors should rush into the market now.
Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC is sliding down inside its overbought zone. RSI has entered its overbought zone. Slow stochastic is moving sideways inside its overbought zone. Some index consolidation or correction is possible.
Nifty's TTM P/E touched the month's high of 28.32 on Thu. Nov 28, but moved down to 28.10 by Fri. Nov 29 - staying well above its long-term average inside overbought zone throughout the month. The breadth indicator NSE TRIN (not shown) oscillated in neutral zone throughout the month, even as the index rallied to touch a new high.
Bottomline? Sensex and Nifty charts touched lifetime highs, and are trading above their rising daily and weekly EMAs in long-term bull markets. Both indices can rise higher if FIIs continue their buying spree. Caution is advised due to the poor GDP and fiscal deficit numbers.
FIIs were net sellers of equity on Mon. and Tue. (Nov 18 and 19), but were net buyers during Wed. through Fri. (Nov 20-22). Their total net buying was worth Rs 47.1 Billion. DIIs were net buyers of equity on Mon. through Wed., but were net sellers on the last two days. Their total net buying was worth Rs 3.3 Billion.
India's urban unemployment rate during Jan-Mar '19 dropped to 9.3% from 9.9% during Oct-Dec '18. Unemployment among 15-29 year olds was 22.5% during Jan-Mar '19 against 23.7% during Oct-Dec '18.
According to a report by CEAMA, India's appliances and consumer electronics market size is expected to nearly double to Rs 1.48 Trillion by FY 25 from Rs 764 Billion in FY 19.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex has been consolidating sideways within a 'rectangle' pattern for the past three weeks. The entire consolidation has taken place above the three rising EMAs in a bull market. So, the expected index breakout from the 'rectangle' is upwards.
However, a 'rectangle' is an unreliable pattern that can sometimes act as a 'reversal' pattern. A downward breakout from the pattern is a possibility that should not be ignored. The zone between 39450 and 39250 can act as a support on the downside.
Daily technical indicators are showing downward momentum. MACD crossed below its rising signal line and has slipped down from its overbought zone. ROC is below its falling 10 day MA and has dropped into bearish zone. RSI and Slow stochastic are falling towards their respective 50% levels.
Note that all four indicators are showing negative divergences by moving down while the the index is consolidating sideways and three EMAs are moving up. That can trigger some correction or more sideways index consolidation.
Of late, market experts have been talking about overvalued quality stocks and pockets of value among mid-cap and small-cap stocks. Small investors would do well to ignore such talk. During economic slowdowns, smaller companies and their stocks tend to underperform.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty gained about 19 points and closed well above its three rising EMAs in a long-term bull market. However, the index is struggling to close above the psychological 12000 level, and may have formed a small 'double top' reversal pattern.
Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC has started to slide down inside its overbought zone. RSI is moving sideways just below the edge of its overbought zone. Slow stochastic is moving sideways inside its overbought zones. More index consolidation or some correction is possible.
Nifty's TTM P/E has moved up to 27.77 - 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 sideways above their rising daily and weekly EMAs in long-term bull markets. Both indices are close to their lifetime highs, which is not a good time to buy.
FIIs were net sellers of equity on Mon. and Tue. (Nov 18 and 19), but were net buyers on Wed. (Nov 20). Their total net selling was worth Rs 6.2 Billion. DIIs were net buyers of equity on on all three trading days. Their total net buying was worth Rs 7.5 Billion, as per provisional figures.
Economists at SBI, Capital Economics and Nomura have lowered their Q2 (Sep '19) GDP growth forecasts to figures between 4.2% and 4.7%. Q2 GDP data will be published on Nov 29.
The government remains in denial. Jr Finance Minister stated in Parliament that there is no 5% GDP growth slowdown and the government has no intention of revising the fiscal deficit target.
The daily bar chart pattern of Nifty has been consolidating sideways within a 'rectangle' pattern for the past three weeks. The index is still struggling to cross above the 12000 level in a convincing manner.
A 'rectangle' usually acts as a 'continuation' pattern. Since the index is trading above its three rising EMAs in a bull market, the likely breakout from the 'rectangle' is upwards.
However, a 'rectangle' is also an unreliable pattern. That means, a downward breakout can't be ruled out. It may be prudent to wait for the breakout before taking any buy/sell decision.
Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is moving sideways below its falling signal line. RSI is gradually moving up towards its overbought zone. Slow stochastic is also moving sideways.
All three indicators are showing negative divergences by failing to move up towards their previous highs. Some more consolidation within the 'rectangle', or a correction towards 11700 is possible.
Nifty's TTM P/E has moved down to 27.23, which remains well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is moving down sharply in neutral zone, and may limit near-term index upside.
The index rally during the past couple of days has been narrow, and led mainly by a spurt in the price of RIL. Caution is advised for those who are getting ready to jump into the market.
Gold chart pattern
The daily bar chart pattern of Gold shows three clearly identifiable consolidation patterns - a 'falling wedge', a 'rectangle' and a 'symmetrical triangle'. All three patterns formed after the 'golden cross' of the 50 day EMA above the 200 day EMA technically confirmed a bull market.
After breaking out above the 'symmetrical triangle' on Wed. Jul 17, gold's price touched a 52 week high of 1454 on Thu. Jul 18. Note that all three technical indicators showed negative divergences by touching lower tops, which triggered a pullback to the top of the 'triangle'.
Daily technical indicators are in bullish zones after correcting overbought conditions, but are not showing much upward momentum. MACD is moving sideways below its falling signal line. RSI is hovering just below its overbought zone. Slow stochastic has bounced up after slipping below its 50% level.
The US Dollar index has been consolidating sideways between 96.40 and 97.20 since Jul 5. Gold's price consolidated sideways in tandem. After touching a low of 96.40 on Jul 19, the Dollar index has been climbing towards 97.20.
On longer term weekly chart (not shown), gold’s price closed well above its three rising weekly EMAs in long-term bull territory. Weekly technical indicators are inside their respective overbought zones. Some price correction or consolidation may follow.
Silver chart pattern
The daily bar chart pattern of Silver consolidated within a bullish 'flag' pattern from which an upward breakout occurred on Mon. Jul 15. Rising volumes propelled silver's price to a 52 week high of 16.62 on Fri. Jul 19 before profit booking caused a fall just below 16.20.
Silver's price has since bounced up to close just above 16.40, and well above its three EMAs in bull territory. The 'golden cross' of the 50 day EMA above the 200 day EMA has technically confirmed a return to a bull market.
Daily technical indicators are looking bullish and overbought. MACD and RSI are rising inside their respective overbought zones. Slow stochastic is correcting inside its overbought zone - hinting at some near-term price consolidation or correction.
On longer term weekly chart (not shown), silver's price tested resistance from its 200 week EMA, and closed well above its 20 week and 50 week EMAs in a long-term bear market. Weekly technical indicators are looking bullish and showing upward momentum.
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 next hurdle for bulls is the previous (Nov 7) index top of 2815. Bears can be expected to put up some resistance there - as they had done in Oct '18."
In a curtailed trading week, the index touched an intra-day high of 2800 on Mon. Dec 3. Bear resistance caused a drop to an intra-day low of 2773 before the index closed at 2790 (near its opening level) - forming a 'doji' candlestick pattern that some times mark a change of direction.
The next day, the index fell sharply below its three EMAs into bear territory. After the mid-week holiday (due to President Bush's funeral), bears attacked with renewed vigour. The index touched an intra-day low of 2621, but recovered substantially to close at 2696.
Bulls failed to drive home their advantage. The index touched an intra-day high of 2708 on Fri. Dec 7, but closed at 2633 - losing 127 points (4.6%) on a weekly closing basis.
The strong index volatility during the past two months is an indication of a transition from a bull to a bear market. (The volatility during Feb-Mar '18 was an advance warning of such a transition.) The impending 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a bear market.
Daily technical indicators are looking bearish and showing downward momentum. MACD is about to cross below its signal line in bearish zone. RSI is falling below its 50% level. Slow stochastic is falling towards its oversold zone.
All three indicators are showing positive divergences by touching higher bottoms - hinting at another pullback towards the 200 day EMA. Bears are likely to 'sell on rise' again.
On longer term weekly chart (not shown), the index closed below its sliding 20 week and 50 week EMAs, but above its 200 week EMA in a long-term bull market. Weekly technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. RSI is falling after facing resistance from its 50% level. Slow stochastic is poised to fall inside its oversold zone.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 touched an intra-day high of 7145 on Mon. Dec 3, but faced strong resistance from its sliding 50 day EMA. That was a trigger for bears to go on the offensive after two months of sideways consolidation (marked by blue 'rectangle').
A 'rectangle' is usually a continuation pattern. Since the index was falling when it entered the 'rectangle', the likely breakout was downwards. But a 'rectangle' tends to be unreliable, so one needs to wait for the eventual breakout before taking any buy/sell decision.
The downward breakout occurred on Thu. Dec 6. The index touched an intra-day 52 week low of 6674 before recovering to close above 6700. A pullback to the lower edge of the 'rectangle' followed on Fri. Dec 7. Bears promptly used the pullback to sell.
The index lost 202 points (2.9%) on a weekly closing basis, and is trading well below its three EMAs in a bear market.
Daily technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. RSI has bounced up after receiving support from the edge of its oversold zone. Stochastic is trying to emerge from its oversold zone. More correction is likely.
On longer term weekly chart (not shown), the index touched a 2 year low and closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are in bearish zones, and showing downward momentum. MACD is falling below its signal line. RSI is about to fall inside its oversold zone. Stochastic has re-entered its oversold zone.
Gold chart pattern
The daily bar chart pattern of Gold consolidated sideways within a 'rectangle' pattern for almost 8 weeks before breaking out upwards with a strong volume surge on Oct 11.
After a pullback to the top of the 'rectangle' the following day, gold's price rose to test resistance from the zone between 1240 and 1250. It has been consolidating sideways above its 20 day and 50 day EMAs, but remains below its falling 200 day EMA in a bear market.
A dip in the US Dollar index to 94.50 possibly triggered the upward breakout. The Dollar index has since moved above 95.50, putting a lid on gold's price.
Daily technical indicators are in bullish zones but not showing upward momentum. MACD is above its signal line but its up move has stalled. RSI is sliding down. Slow stochastic is about to drop from its overbought zone. Expect some more consolidation in the zone between 1220 and 1240.
On longer term weekly chart (not shown), gold’s price crossed above its 20 week EMA intra-week, but closed just below it, and well below its 50 week and 200 week EMAs in long-term bear territory. Weekly technical indicators are turning bullish. MACD formed a 'rounding bottom' pattern and crossed above its signal line in bearish zone. RSI has moved up towards its 50% level, but is not showing upward momentum. Slow stochastic has risen sharply above its 50% level.
Silver chart pattern
The daily bar chart pattern of Silver moved above its 20 day and 50 day EMAs, but retreated after touching a lower top. Since the beginning of the month, silver's price has been consolidating sideways within a 'triangle' pattern.
Volumes have been stronger on recent down days. In case of an upward breakout from the 'triangle', the zone between 15.0 and 15.2 can provide strong resistance.
Since a 'triangle' is an unreliable pattern, a downward breakout and a test of the Sep '18 low can't be ruled out. It would be prudent to wait for the breakout before taking any buy/sell decision.
Daily technical indicators are in neutral zones and showing downward momentum. MACD is above its signal line and moving sideways. RSI is seeking support from its 50% level. Slow stochastic is moving down towards its 50% level. Expect some more consolidation in the zone between 14.4 and 15.0.
On longer term weekly chart (not shown), silver’s price closed well below its three falling weekly EMAs in a long-term bear market. Weekly technical indicators have remained in their respective bearish zones after correcting oversold conditions.
Gold chart pattern
The daily bar chart pattern of Gold has been consolidating sideways within a 'rectangle' pattern for the past five weeks - getting support from the 1190 level and facing resistance from the 1220 level.
Gold's price has been oscillating about its 20 day EMA, and is trading below its falling 50 day and 200 day EMAs in a bear market. Higher volumes on recent down days indicate that bears remain in charge.
A 'rectangle' is an unreliable pattern - sometimes acting like a continuation pattern and sometimes like a reversal pattern. One has to wait for the eventual price breakout before taking any buy/sell decisions.
Daily technical indicators are looking bearish to neutral, and not showing any upward momentum. MACD is above its rising signal line in bearish zone. RSI and Slow stochastic are oscillating in their respective neutral zones.
On longer term weekly chart (not shown), gold’s price closed well below its three weekly EMAs in long-term bear territory. The 'death cross' of the 50 week EMA below the 200 week EMA has technically confirmed a long-term bear market. Weekly technical indicators are in bearish zones after correcting oversold conditions.
Silver chart pattern
The following comment appeared in the previous post on the daily bar chart pattern of Silver: "Silver's price has resumed its downward journey and may fall below 14.20 in the near term."
Silver's price touched a low of 13.91 on Sep 11, and has been consolidating within a bearish 'rising wedge' pattern for the past three weeks. The likely breakout from the 'wedge' is downwards.
Daily technical indicators are showing some bullish signs. MACD is rising above its signal line in bearish zone. RSI is hovering below its 50% level. Slow stochastic has moved above its 50% level. Silver's price is trading well below its falling 50 day and 200 day EMAs in a bear market.
On longer term weekly chart (not shown), silver’s price closed well below its three falling weekly EMAs in a long-term bear market. Weekly technical indicators are inside their respective oversold zones.
Gold chart pattern
Since the second week of Jan '18, the daily bar chart pattern of Gold has been consolidating sideways within a broad 60 points rectangular range (between 1305 and 1365).
Note that the entire consolidation has occurred above the rising 200 day EMA in a bull market, with gold's price receiving support from the zone between 1300 & 1310, and facing resistance from the zone between 1360 & 1370.
Rectangular consolidation patterns are often continuation patterns. Since gold's price entered the consolidation zone after a rally from its Dec '17 low, the probability of an upward breakout above the resistance zone (between 1360 & 1370) is greater.
However, it may be better for longer-term investors to wait for the eventual breakout to initiate any buy/sell action because a 'rectangle' is a fickle pattern that can also act as a 'reversal pattern'.
Daily technical indicators are in bullish zones, and showing slight upward momentum. Another test of resistance from the zone between 1360 & 1370 is likely. Keep a close watch on the US Dollar index to get clues about gold's future price movements.
On longer term weekly chart (not shown), gold’s price closed above its three rising weekly EMAs in long-term bull territory. Weekly technical indicators are in bullish zones, but not showing any upward momentum. Some more consolidation is likely.
Silver chart pattern
Since the beginning of Feb '18, the daily bar chart pattern of Silver has been consolidating sideways in a rectangular range (between 16.10 & 16.90) in bear territory.
Silver's price has been facing resistance from its gradually sliding 200 day EMA, and getting strong support from the zone between 16.10 & 16.20.
Daily technical indicators are looking bearish to neutral, but are showing positive divergences by touching higher tops while silver's price has been touching lower tops.
A rally above the 200 day EMA is a possibility. Bears are likely to use the opportunity to sell again.
On longer term weekly chart (not shown), silver’s price closed at its 20 week EMA, but below its sliding 50 week and 200 week EMAs in a long-term bear market. Weekly MACD and Slow stochastic are in bearish zones. RSI is in neutral zone.
In a holiday-curtailed trading week, FIIs were net sellers of equity worth Rs 28.5 Billion, as per provisional figures. DIIs were net buyers of equity worth Rs 23.7 Billion.
For the second week in a row, Sensex and Nifty traded below the downward 'gaps' formed on Feb 5, but didn't lose much ground on a weekly closing basis.
India's wholesale inflation rose slower than expected in Jan '18. WPI eased to 2.84% YoY compared to 3.58% in Dec '17 due to lower food prices.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex consolidated sideways during the week. The failure to close above the 50 day EMA despite intra-day breaches three days in a row was a sign that bears are continuing to 'sell on rise'.
The fact that Sensex didn't fall inside the 'support/resistance zone' between 32550 and 33800 may provide some solace to bulls, but not for long.
Market sentiment shifted from extremely bullish to bearish due to re-introduction of LTCG tax. FIIs have voted with their feet. The PNB scam has further exacerbated bearish sentiment.
Technically, the 132 points 'gap' will be a tough resistance to overcome in the near-term. Even if the 'gap' gets filled (partly or fully), the down move should resume thereafter.
Support from the 33800 level has been tested twice already. A support (or resistance) level gets weakened by each subsequent test. That increases the probability of a fall inside the 'support/resistance zone' and a test of support from the 200 day EMA.
Daily technical indicators are looking bearish and a bit oversold. But don't expect any significant recovery before Apr '18, as investors are going to book profits till Mar 31 '18 to lock-in tax-free LTCG.
There are technical reasons for not being bullish in the near-term. The sideways consolidation during the past two weeks (below the 'gap') appears to be forming either a 'triangle' or a 'rectangle' pattern. Both patterns are typically continuation patterns. So, the more likely breakout is downwards.
Also, the huge Rs 128 Billion Tata Steel rights issue - at a discount to CMP - will remain open from Feb 14 to 28. That will squeeze out a lot of cash from the secondary market.
The long-term trend remains bullish, as the 200 day EMA is still rising and the index is trading above it. The correction is providing an opportunity for booking profits in small/mid-cap stocks and selectively entering large-caps.
NSE Nifty index chart pattern
For the second straight week, the weekly bar chart pattern of Nifty traded below the 33 points downward 'gap' formed on Feb 5, and closed below the support level of 10490.
While that clearly shows bear domination, the index managed to close just above its 20 week EMA and well above its rising 50 week EMA in a long-term bull market.
Despite strong bearish sentiment and heavy selling by FIIs, the index has managed to hold ground because of steady inflows into domestic mutual funds.
Weekly technical indicators are beginning to turn bearish. MACD has crossed below its signal line and fallen from its overbought zone. ROC has crossed below its 10 week MA and is poised to enter bearish zone. RSI and Slow stochastic are seeking support from their respective 50% levels.
A fall below the 20 week EMA and a possible test of support from the 50 week EMA seems likely. Any attempt by the index to rally and close the 'gap' will bring bears to the fore.
Nifty's TTM P/E is at 25.32 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating about the edge of its oversold zone, as bulls and bears have battled each other to a temporary stalemate.
Bottomline? Sensex and Nifty charts are undergoing corrections after 13 months long bull rallies. The downward 'gaps' formed on Mon. Feb 5 are acting as resistance zones. Any pullbacks towards the 'gaps' may induce more selling and likely lower levels in both indices. Avoid bottom fishing.
Volumes were expected to be low due to F&O expiry on Jan 25 and Republic Day holiday on Jan 26. That didn't deter FIIs from buying. Their net buying in equities was worth Rs 45.1 Billion during the week.
DIIs were net sellers of equity worth Rs 14.5 Billion, as per provisional figures. Sensex (36268) and Nifty (11110) touched new highs during the week before retreating a bit due to profit booking.
GST collection reversed trend by rising to Rs 867 Billion in Dec '17. Collections had slipped to Rs 808 Billion in Nov '17 from more than Rs 830 Billion in Oct '17. Measures to raise compliance are beginning to show results, as per government officials.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex touched new intra-day and closing highs on Wed. Jan 24, but formed a 'doji' candlestick pattern (which indicates indecision among bulls and bears).
There was profit booking on Thu. Jan 25 before the long weekend. Bulls had built up a good head of steam after breaking out above a 'rectangle' consolidation pattern on Jan 8. Some correction will improve the technical 'health' of the chart.
Daily technical indicators are well inside their overbought zones. Remember that an index (or a stock) can remain overbought for long periods. Corrections - if and when they happen - should be treated as adding opportunities.
There is no point in waiting for a correction, or selling in a panic. Neither should one jump in feet first near an index top. Stay calm, be selective, look for quality and take a long-term view.
Q3 (Dec '17) results declared by India Inc. so far have been encouraging. However, the concern about a jobless growth remains. The government is trying to make business in India easier for foreign entities. Uncontrolled hooliganism by fringe saffron groups is putting a spanner in the works.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty touched a new high for the 8th week in a row. Since 8 is a number in the Fibonacci series, technical traders may use it as an excuse to book profits next week.
The index is trading well above its rising weekly EMAs in a bull market. Weekly technical indicators are inside their respective overbought zones. Any correction can be used to add to existing holdings.
Nifty's TTM P/E has increased to 27.61 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is emerging from its overbought zone, and can limit index upside.
Bottomline? Sensex and Nifty charts have closed at new highs once more. Q3 (Dec '17) results of India Inc. are showing better-then-expected earnings improvements thanks to a lower base effect due to demonetisation in Q3 (Dec '16). Follow a 'buy the dips' strategy.
FIIs have gone back to their bearish ways. Their net selling in equities during the week was worth Rs 9.6 Billion. DIIs' net buying in equities was much higher at Rs 23.8 Billion, as per provisional figures. Sensex and Nifty touched new highs once again.
The Index of Industrial Production (IIP) rose to 8.4% in Nov '17 against 2.2% in Oct '17 - thanks to a lower base effect. The cumulative Apr-Nov '17 YoY growth figure was 3.2%.
Retail (CPI) inflation accelerated to 5.2% in Dec '17 against 4.9% in Nov '17. Rising food and fuel prices can lead to an interest rate hike by RBI. That will not be good news for the stock market.
BSE Sensex index chart pattern
Combined net buying in equities by FIIs and DIIs on Mon. Jan 8 buoyed the daily bar chart pattern of Sensex to a smart breakout above the small 'rectangle' within which it was consolidating for the previous three weeks.
Though FIIs turned net sellers of equity for the rest of the week, heavy buying by DIIs propelled the Sensex to new intra-day (34638) and closing (34592) highs on Fri. Jan 12.
Note that the index formed a 'dragonfly doji' candlestick pattern on Fri., indicating hesitation among bulls and bears.
Daily technical indicators are in bullish zones, but only MACD is showing upward momentum. All four indicators failed to touch new highs with the index. The negative divergences can lead to some consolidation or correction.
Sensex is trading above its three rising EMAs in a bull market. That means dips can be used to add to existing holdings. Aggressive buying should be avoided because the index is at an all-time high and Q3 (Dec '17) results season has just begun.
NSE Nifty index chart pattern
After breaking out above a 'flag' pattern, the weekly bar chart pattern of Nifty had pulled back towards the top of the 'flag' before recovering to close above 10490 (its Nov '17 top) in the previous week.
Bulls took the opportunity to take charge. The index opened with a 23 points upward 'gap' on Mon. Jan 8, and then rose to touch intra-week (10690) and closing (10681) highs on Fri. Jan 12.
Weekly technical indicators are in bullish zones but not showing much upward momentum. MACD has crossed above its signal line to enter its overbought zone. ROC is moving sideways below its 10 week MA. RSI and Slow stochastic are also moving sideways inside their respective overbought zones.
Nifty's TTM P/E has increased to 27.28 - well above its long-term average. The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone, and is rising inside neutral zone - hinting at a correction or consolidation.
Bottomline? Sensex and Nifty charts have closed at new highs again. Bulls are expecting Q3 (Dec '17) results to show earnings improvement due to lower base effect. Use dips to add to existing holdings, but avoid aggressive buying close to a market top.
(Note: Markets fluctuate, but there are always opportunities if you know where to look. Learn how to choose fundamentally strong mid-cap and small-cap stocks. Become a paid subscriber of my Monthly Investment Newsletter. A limited number of new subscriptions are being offered till Jan 21, 2018. Enrollments have started. Contact me for details: mobugobu@yahoo.com.)
In an apparent change of stance, FIIs turned net buyers of equity - worth Rs 17.4 Billion - during the first week of trading in 2018. DIIs were net sellers of equity worth Rs 9.4 Billion as per provisional figures, but they were net buyers on Thu. & Fri. (Jan 4 & 5).
Sensex (34154) and Nifty (10559) closed at new highs at the end of the week, but haven't made much upward progress after breaking out above 'flag' patterns three weeks back.
The Nikkei India Services PMI rose to 50.9 in Dec '17 against 48.5 in Nov '17 (a number above 50 indicates expansion). The Composite PMI (Manufacturing plus Services) rose to 53 in Dec '18 against 50.3 in Nov '17 - highest since Oct '16.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex has been consolidating sideways within a 'rectangle' pattern for the past three weeks - after breaking out above a bullish 'flag' pattern.
The rising 20 day EMA has provided good downside support. On Fri. Dec 5, the index broke out and closed just above the 'rectangle' - on the back of combined FII and DII buying. But the breakout hasn't been a convincing one.
Daily technical indicators are in bullish zones. MACD is about to bounce up after seeking support from its signal line. ROC is trying to cross above its falling 10 day MA. RSI is moving sideways at the edge of its overbought zone. Slow stochastic has bounced up from the edge of its overbought zone.
All four indicators are showing negative divergences by failing to touch new highs with the index. A correction towards the lower edge (33700) of the 'rectangle' is possible.
Combined buying by FIIs and DIIs - like on Jan 4 & 5 - can propel the index higher. Let your asset allocation plan guide you on whether to buy, hold or book partial profits.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty rose to touch new intra-week (10566) and closing (10559) highs during the first week of trading in 2018. The index is trading above its three rising weekly EMAs in a bull market.
Despite bullish fervour (note the strong volume support), the index hasn't progressed very far above the 10490 level (the intra-week high touched 8 weeks back).
Weekly technical indicators are in bullish zones. MACD has merged with its signal line at the edge of its overbought zone. RSI has entered its overbought zone after 5 months. Slow stochastic is well inside its overbought zone. ROC is looking bearish by falling from its overbought zone and crossing below its 10 week MA.
Nifty's TTM P/E has increased to 26.99 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is rising inside its overbought zone, and can trigger a correction.
Bottomline? Sensex and Nifty charts have closed at new highs but are in sideways consolidation zones. Concerns about Q3 (Dec '17) results have prevented bulls from charging ahead. Lower base effect may lead to some earnings growth in Q3. Any dips can be used to add to existing holdings.
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