Gold and Silver charts: bulls try to fight back, but bears still rule

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.

S&P 500 and FTSE 100 charts (Mar 16, 2018): bulls forced to retreat

S&P 500 index chart pattern

The following remark was made in last week's post on the daily bar chart pattern of S&P 500: "It may be a bit early for bulls to start celebrating." 

The index rose past its Feb 27 top of 2789 to touch an intra-day high of 2802 on Tue. Mar 13 but closed much lower, forming a 'reversal day' bar that triggered a pullback to the top of the 'triangle'.

The index touched an intra-day low of 2741 on Thu. Mar 15, but bounced up to close just above the 2750 level on Fri. Mar 16 - forming an 'inverted hammer' candlestick. The accompanying volume surge is often a sign of trend reversal.

Daily technical indicators are in bullish zones but not showing any upward momentum. MACD is moving sideways above its signal line. RSI is trying to rise after receiving support from its 50% level. 

Slow stochastic is showing negative divergence by touching a lower top and forming a 'double top' reversal pattern inside its overbought zone. Bears may try to press home their advantage.

The index is trading well above its rising 200 day EMA in a long term bull market. However, the sharp volatility during the past 6 weeks should be treated with caution.

On longer term weekly chart (not shown), the index formed a weekly 'reversal' bar and closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones but not showing any upward momentum.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 failed to overcome resistance from its falling 20 day EMA, and dropped below the long-term 'support/resistance' level of 7200.

The index is trading below its three EMAs in a bear market that was technically confirmed by the 'death cross' (blue circle) of the 50 day EMA below the 200 day EMA.

Daily technical indicators are showing upward momentum. However, all three are in bearish zones. (At the time of writing this post, the index is trading below 7100.)

The 'double bottom' pattern may get tested.

On longer term weekly chart (not shown), the index closed below the support level of 7200. It remains below its 20 week and 50 week EMAs but above its 200 week EMA in a long-term bull market. Weekly MACD and Slow stochastic are inside their oversold zones. RSI is falling below its 50% level.

S&P 500 and FTSE 100 charts (Mar 09, 2018): bulls fighting back

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 rallied above its 20 day and 50 day EMAs after forming a 'reversal day' bar (lower low, higher close) on Mar 2.

On Fri. Mar 9, the index formed an upward 'gap' of 11 points and rose to close at the highest point of the day (2786.57). In the process, the index appears to have broken out above a large 'triangle' pattern.

It may be a bit early for bulls to start celebrating. Last week's rally was accompanied by sliding volumes. Also, the index needs to move convincingly above the Feb 27 top of 2789 for bulls to regain control.

Daily technical indicators are looking bullish. MACD has entered positive territory above its signal line. RSI has moved above its 50% level. Slow stochastic has bounced up from its 50% level.

Trump's import tariff on steel and aluminium may evolve into a global trade war, as the EU has threatened to retaliate. That will not be a desirable outcome for the global economy and stock markets.

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

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 shows bulls are fighting back. By touching a slightly lower intra-day low of 7062 on Mar 5 and forming a 'reversal day' bar (lower low, higher close), the index appears to have formed a 'double bottom' reversal pattern.

The subsequent rally took the index above the long-term 'support/resistance' level of 7200, where the falling 20 day EMA is providing resistance. 

The 'death cross' of the 50 day EMA below the 200 day EMA has technically confirmed a bear market. Bulls have a lot of work left to regain any control. 

The Feb 27 top of 7326 is the first hurdle that needs to be crossed. Only then will the 'double bottom' pattern receive technical confirmation.

Daily technical indicators are turning bullish. MACD has crossed above its signal line in bearish zone. RSI is trying to move up in bearish zone.  Slow stochastic has crossed above its 50% level to enter bullish zone. 

On longer term weekly chart (not shown), the index appears to have formed a 'double bottom' reversal pattern and closed above 7200. It remains below its 20 week and 50 week EMAs but above its 200 week EMA in a long-term bull market. Weekly MACD and Slow stochastic are sliding down inside their oversold zones. RSI is falling below its 50% level.

Nifty chart: a midweek technical update (Mar 07, 2018)

FIIs and DIIs were both net sellers of equity during the first four trading days of Mar '18. FIIs were buyers and sellers on alternate days. DIIs were net sellers on the first three days and net buyers today.

The upshot of all the buying and selling? FIIs were net sellers of equity worth Rs 2.2 Billion. DIIs were net sellers worth Rs 4.8 Billion. Nifty broke out below a 'triangle' pattern within which it had been consolidating since forming a 33 points downward 'gap' on Feb 5.

Nikkei India's Services PMI fell to 47.8 in Feb '18 from 51.7 in Jan '18. (A figure below 50 indicates economic contraction.) The Manufacturing PMI was 52.1 in Feb '18 against 52.4 in Jan '18. The Composite index (Services + Manufacturing) dropped to 49.7 in Feb '18 against 52.5 in Jan '18.

The following comments were made in the previous midweek technical update on the daily bar chart pattern of Nifty: "..the 20 day EMA is about to cross below the 50 day EMA after staying above it for almost 13 months. A test of support from the 200 day EMA may occur sooner than later."

Note that the 20 day EMA has already crossed below the 50 day EMA, and both EMAs are falling. The index moved down to test support from the 200 day EMA and touched an intra-day low of 10142 today before closing just above the 10150 level.

Daily technical indicators are showing strong downward momentum in bearish zones. MACD and RSI are on the verge of entering their respective oversold zones. Slow stochastic has entered its oversold zone. 

A technical bounce/pullback towards the lower edge of the triangle is possible. Such a pullback may be used by bears to sell again.

Nifty's TTM P/E has moved down to 24.79 - still much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has risen sharply towards its oversold zone, and can limit near-term index downside.

Will Nifty breach the 200 day EMA and fall into bear territory? With FIIs and DIIs in selling mode, the probability is very high. Where will be the next likely supports? See the 2 years closing chart of Nifty below:

The 'support/resistance zone' between 9700 & 9500 should provide strong support. Expect some value buying to emerge in the zone between 10000 & 9700. What if the index falls below 9500?

There is some support around 9300, and much stronger support at 9000. [Note that 9050 is the 50% Fibonacci retracement level of the entire bull rally from the Feb '16 closing low to the Jan '18 closing high.]

Can the index fall below 9000? It doesn't seem likely at this stage, but nothing is impossible when bears go on the rampage. If 9000 gets breached, a bear market will begin. Though the probability is low, one needs to know the worst case scenario.

Sensex, Nifty charts (Feb 16, 2018): bears remain on top

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.

WTI and Brent Crude Oil charts: consolidating sideways within 'triangle' patterns

WTI Crude Oil chart

The daily bar chart pattern of WTI Crude Oil has been consolidating sideways within a large 'triangle' pattern for the past three months - alternatively rising above and falling below the 200 day EMA.

Oil's price is trading above its gradually rising 200 day EMA. Volumes have been stronger on recent up-days. These are signs that bulls are at a slight advantage. 

Daily technical indicators are in bullish zones, but MACD and RSI are not showing much upward momentum. Some more consolidation within the 'triangle' is likely.

Oil's price touched a lower top on Sep 8, and failed to test resistance from the upper edge of the 'triangle'. That may lead to a drop below the 'triangle'.

A 'triangle' pattern is unreliable. So, it is better to wait for the breakout before initiating any buy/sell decision. 

On longer term weekly chart (not shown), oil's price is trading above its entangled 20 week and 50 week EMAs but well below its sliding 200 week EMA in a long-term bear market. Weekly technical indicators are in bullish zones, but MACD and Slow stochastic are not showing any upward momentum.

Brent Crude Oil chart

The following remarks were made in the previous post on the daily bar chart pattern of Brent Crude Oil: "Daily technical indicators are in the process of correcting overbought conditions. A pullback towards the 200 day EMA is a possibility."

Oil's price dropped and closed below its 200 day EMA on Sep 1, but bounced up the very next day. It crossed the 50 level intra-day on Sep 8, but failed to test resistance from the upper edge of the 'triangle'. That may lead to a correction below the 'triangle'. 

A 'triangle' pattern is unreliable because a breakout can occur in either direction. It may be a good idea to wait for the eventual breakout before deciding to buy/sell.

On longer term weekly chart (not shown), oil's price is trading above its 20 week and 50 week EMAs but well below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are in bullish zones, but none are showing any upward momentum.

Gold and Silver charts: bulls bounce back after post-BrExit corrections

Gold chart pattern

The following remarks were made in the previous post on the daily bar chart pattern of Gold: "BrExit concerns have receded. That doesn't mean gold's price can't move even higher. It may take a little time."

Gold's price slipped below its 20 day EMA, but received good support from the 1310 level and bounced up to the 1360 level. A new 52 week high is just about 20 points away.

All three EMAs are rising, and gold's price is trading above them in a bull market. Daily technical indicators are in bullish zones, but MACD is yet to cross above its signal line and the upward momentum of RSI has stalled.

Volumes are a bit of a concern. They need to pick up for the rally to sustain. Otherwise, gold's price can see some consolidation. 

On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in long-term bull territory for the 8th week in a row. The 20 week EMA has crossed above the 200 week EMA. The 'golden cross' of the 50 week EMA above the 200 week EMA, which will signal a return to a long-term bull market, is awaited. Weekly technical indicators are looking overbought.

Silver chart pattern

The following remarks were made in the previous post on the daily bar chart pattern of Silver: "The possibility of a downward break out from the triangle can't be ruled out. Should that happen, it will be a good buying opportunity."

Note that silver's price did break down below the triangle, only to pullback to the bottom of the triangle and then fall again. On both occasions, the rising 20 day EMA provided downside support.

Usually, a breakdown from a triangle - and any subsequent pullback - should be a selling opportunity. So, why was it suggested as a buying opportunity? Because of the rapidly rising EMAs indicating strong bullish sentiment.

Can silver's price face a correction? Sliding volumes during the past 4 days seem to suggest as much. Daily technical indicators are in bullish zones, but only Slow stochastic is showing good upward momentum.

On longer term weekly chart (not shown), silver’s price closed above its 200 week EMA in long-term bull territory for the 5th straight week. All three weekly technical indicators are looking overbought and hinting at some consolidation or correction.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Dec 11, 2015

S&P 500 Index Chart

The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "The entire trading since the beginning of Nov ‘15 has been a sideways consolidation within a ‘symmetrical triangle’ pattern, from which a break out can occur at any time. Since triangles tend to be continuation patterns, the break out is expected to be upwards. But triangles are unreliable – so one should wait for the break out before initiating a buy/sell action."

The index broke down below the triangle on the last day of the week, and dropped below all three EMAs into bear territory. A bearish pattern of lower tops and lower bottoms has been formed.

Strong volumes on 4 of the 5 down days last week clearly show bear domination. All three daily technical indicators are in bearish zones, and showing downward momentum - hinting at a deeper correction.

Is the index getting ready to enter another bear phase? It may be a bit early to call, as the technical pattern is still evolving. If the index bounces up strongly from its current level - like it did in mid-Nov '15 - there is a possibility of formation of a bullish 'flag' pattern. 

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 turning bearish.

FTSE 100 Index Chart

The daily bar chart pattern of FTSE 100 closed lower on all 5 trading days last week, and dropped below the 6000 level - losing 4.5% on a weekly closing basis. All three EMAs are moving down and the index is trading well below them in a bear market.

Daily technical indicators are in their oversold zones, which can lead to a technical bounce at any time. But it should not be used as a bottom-fishing opportunity. Why? Because there is no sign of a bottom formation as yet.

On longer term weekly chart (not shown), the index stayed below all three weekly EMAs during the week. Weekly technical indicators have turned bearish. The ‘death cross’ of the 50 week EMA below the 200 week EMA will technically confirm a long-term bear market. 

WTI and Brent Crude Oil charts: an update

WTI Crude chart

The following comments were made in the previous post on the daily bar chart pattern of WTI Crude oil:

”Is the pullback to the top of the ‘triangle’ a buying opportunity? Not really. Note that volumes on the two down-days last week exceeded the volumes on the three up-days. That shows strong bear presence.”

Oil’s price hesitated for a few days near its entangled 20 day and 50 day EMAs before resuming its down trend. The previous low of 38 touched on Aug 24 is likely to be tested.

Daily technical indicators are in bearish zones and showing downward momentum. Oil’s price is falling below its three EMAs in a bear market.

On longer term weekly chart (not shown), oil’s price is trading below its three weekly EMAs in a long-term bear market. Weekly MACD and RSI remain in bearish zones, and are showing downward  momentum. Slow stochastic is about to cross below its 50% level.

Brent Crude chart

The following comments appeared in the previous post on the daily bar chart pattern of Brent Crude oil:

“Note that oil’s price is trading well below its falling 200 day EMA in a bear market. So, the pullback towards the top of the ‘triangle’ is likely to become an ‘end run’ below the triangle.”

Oil’s price briefly sought support from its 20 day and 50 day EMAs before resuming its down move. The 42 level touched on Aug 24 may get tested and breached.

Daily technical indicators are in bearish zones and showing downward momentum. All three EMAs are falling and oil’s price is trading below them in a bear market.

On longer term weekly chart (not shown), oil’s price is trading below its three weekly EMAs in a long-term bear market. Weekly technical indicators remain in bearish zones and are showing downward momentum.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Oct 23, 2015

S&P 500 Index Chart

The daily bar chart pattern of S&P 500 faced resistance from the blue down trend line and dropped below its 200 day EMA midweek.

On Thu. Oct 22, the index crossed above its long-term moving average and the down trend line – accompanied by a spurt in volumes – and closed at a 2 months high.

The 20 day EMA has crossed above its 50 day EMA, and both EMAs are moving up. The ‘death cross’ (marked by blue oval) is likely to get negated soon by a ‘golden cross’ of the 50 day EMA above the 200 day EMA.

The 2 months long foray inside bear territory seems to be over. All three daily technical indicators are in bullish zones. MACD is rising inside its overbought zone. Slow stochastic is oscillating inside its overbought zone, and showing negative divergence by failing to touch a new high with the index.

Expect some consolidation or correction before the index can attempt to climb to a new high.

On longer term weekly chart (not shown), the index closed well above its three weekly EMA in a long-term bull market. Weekly technical indicators are looking bullish, and showing good upward momentum.

FTSE 100 Index Chart

After breaking out upwards from a ‘rectangle’ pattern, the daily bar chart pattern of FTSE 100 consolidated sideways within a ‘triangle’ pattern – from which it broke out upwards on Fri. Oct 23 ‘15.

The 20 day EMA is about to cross above the 50 day EMA. The index needs to cross above its sliding 200 day EMA to return to bull territory. Bears will try to prevent that – though they appear to be steadily losing ground.

Daily technical indicators are in bullish zones, with MACD rising inside its overbought zone and RSI climbing towards its overbought zone.

However, Slow stochastic has dropped from its overbought zone and showing negative divergence by failing to touch a new high with the index.

On longer term weekly chart (not shown), the index managed to close above its 20 week and 200 week EMAs, but is below its 50 week EMA. Weekly MACD and RSI are still in bearish zones, but Slow stochastic has moved above its 50% level. A brief foray into a long-term bear market is about to end.

Gold and Silver charts: an update

Gold chart pattern

The daily bar chart pattern of gold broke out upwards from a ‘triangle’ pattern within which it consolidated for 7 weeks. There was no significant increase in volumes that would have technically validated the breakout.

After briefly facing resistance from its 200 day EMA, gold’s price crossed above its long-term moving average into bull territory with a volume surge on Oct ‘14.

However, it formed a ‘reversal day’ pattern (higher high, lower close) on the next day, and has pulled back to seek support from its 200 day EMA.

Daily technical indicators are correcting overbought conditions, but remain in bullish zones. RSI and Slow stochastic are showing negative divergences by failing to touch new highs with gold’s price.

Bears can be expected to push down gold’s price below its 200 day EMA.

On longer term weekly chart (not shown), gold’s price faced resistance from its 50 week EMA, and closed well below its 200 week EMA in a long-term bear market. MACD is moving up in negative zone. RSI crossed above its 50% level but has turned down. Slow stochastic has entered its overbought zone.

Silver chart pattern

After breaking out upwards from a ‘triangle’ pattern within which it had consolidated for 6 weeks, the daily bar chart pattern of silver continued its bear market rally to cross above its 200 day EMA.

However, silver’s price has been struggling to convincingly cross above its long-term moving average, and has formed a bearish ‘rising wedge’ pattern. Bears are likely to use the opportunity to sell.

Daily technical indicators are correcting overbought conditions. MACD and Slow stochastic are moving down inside their overbought zones. RSI is falling towards its 50% level.

On longer term weekly chart (not shown), silver’s price moved above its 20 week EMA, but faced strong resistance from its 50 week EMA. It is trading well below its falling 200 week EMA in a long-term bear market. MACD is moving up in negative zone. RSI crossed above its 50% level but has turned down. Slow stochastic has entered its overbought zone.

Gold and Silver charts: consolidating sideways in bear markets

Gold chart pattern

The daily bar chart pattern of gold has been consolidating sideways for the past 6 weeks within a ‘triangle’ pattern and oscillating about its 20 day and 50 day EMAs. Since a ‘triangle’ is an unreliable pattern, a breakout can occur in either direction.

Down days have outnumbered up days, but volumes have been strong on a couple of recent up days – indicating some buying interest at lower levels.

However, gold’s price continues to trade below its sliding 200 day EMA in a bear market. Every attempt at a rally has been facing bear selling.

Daily technical indicators are looking mildly bullish. MACD has crossed above its signal line in positive zone. RSI moved above its 50% level but its upward momentum has stalled. Slow stochastic has risen to its 50% level.

On longer term weekly chart (not shown), gold’s price faced resistance from its 20 week EMA, and closed below all three weekly EMAs in a long-term bear market. MACD and RSI are in bearish zones. Slow stochastic has moved above its 50% level, but its upward momentum is weakening.

Silver chart pattern

The daily bar chart pattern of silver broke out upwards with good volume support after spending 6 weeks in a sideways consolidation within a ‘triangle’ pattern.

The rally stalled after touching a high of 15.75. Silver’s price closed below its 200 day EMA in a bear market.

All three daily technical indicators are in bullish zones, and showing good upward momentum. Silver’s price may move up further to test resistance from its 200 day EMA. Expect bear selling to start at any time.

On longer term weekly chart (not shown), silver’s price closed above its 20 week EMA, but is trading below its 50 week and 200 week EMAs in a long-term bear market. RSI and Slow stochastic are in bullish zones, but MACD is still in bearish zone. All three are showing upward momentum.

Gold and Silver charts: an update

Gold Chart Pattern

The following comments appeared in the previous post on the daily bar chart pattern of gold: “… gold’s price appears to have formed a bullish ‘flag’ pattern. An earlier upward breakout from an ‘inverse head and shoulders’ pattern ended in failure due to lack of follow-up buying. Any breakout from the ‘flag’ may meet the same fate – unless the breakout is accompanied by strong volumes.”

The upward breakout from the ‘flag’ on May 13 was accompanied by a sharp volume spike that technically validated the breakout. The subsequent rally managed to cross above the falling 200 day EMA into bull territory. But falling volumes during the past three trading sessions mean that the rally may flatter to deceive.

Daily technical indicators are in bullish zones, but their upward momentum is slowing down. MACD has crossed above its signal line to enter positive zone. RSI is moving sideways above its 50% level. Slow stochastic is well inside its overbought zone, but its upward move has stalled.

Some more upside is possible, but expect bears to step in at any time to push down gold’s price below its 200 day EMA. A strong move above 1260 will technically validate the breakout above the 200 day EMA.

On longer term weekly chart (not shown), gold’s price has crossed above its 20 week EMA but is facing resistance from its 50 week EMA. The 200 week EMA is falling, and gold’s price is trading below it in a long-term bear market. Technical indicators are turning bullish.

Silver Chart Pattern

The daily bar chart pattern of silver followed the yellow metal by breaking out upwards from a ‘triangle’ pattern within which it was consolidating for 6 weeks. A strong volume surge accompanied the breakout and was followed by a sharp up move above the falling 200 day EMA.

Is the bear market in silver finally over? Not quite. The breakout above the ‘triangle’ is technically valid. Not so for the breakout above the 200 day EMA. Why? Because silver’s price is still within the 3% ‘whipsaw’ limit above its 200 day EMA.

Daily technical indicators are looking bullish, and overbought. MACD has risen sharply above its signal line, and entered its overbought zone. RSI has reached the edge of its overbought zone. Slow stochastic is well inside its overbought zone.

A correction can occur at any time.

On longer term weekly chart (not shown), silver’s price has just managed to close above its falling 50 week EMA, but is trading well below its 200 week EMA in a long-term bear market. Technical indicators are turning bullish.

BSE Sensex and NSE Nifty 50 index chart patterns – Jun 20, 2014

Stock market players – investors, brokers, analysts, funds – have finally agreed that a bull market is in progress. Some are calling it a ‘new’ bull market; others are still hedging their bets and calling it ‘the cusp’ of a bull market. So, Sensex and Nifty should be moving up, right?

Instead, both indices closed lower for the second straight week. What is going on? Anticipation of an NDA-led government, and its confirmation after the elections had changed market sentiment from mildly bullish to strongly bullish. That led to sharp up moves on both indices.

The market became ‘overbought’ technically, and required some correction or consolidation for restoring its technical ‘health’. Such corrections or consolidations in bull markets are necessary for the indices to gather ‘energy’ for the next up move, and provide entry or adding opportunities.

BSE Sensex index chart

Three bearish signals were mentioned in last week’s analysis of the daily bar chart pattern of Sensex. The first – a likely ‘false’ upward break out from the consolidation within a symmetrical triangle – has turned out to be a bullish signal. The index is consolidating within a ‘falling wedge’ pattern from which the break out should be upwards.

The other two bearish signals – widening gap between the 50 day and 200 day EMA, and increasing downward momentum of the technical indicators – are still visible. The consolidation within the ‘wedge’ may continue next week, which is also F&O expiry week.

All four technical indicators have corrected from their respective overbought zones. ROC has dropped into bear territory below its ‘0’ line. The other three are still in bullish zones, but falling. Use the index slide to accumulate good stocks.

What about the trouble in Iraq that has led to higher oil prices? It did dampen bullish sentiments, and perhaps caused the consolidation within the ‘wedge’. Some times, an overbought market just needs an excuse to correct or consolidate. The long-term bull market is intact.

NSE Nifty 50 index chart

As expected, the weekly bar chart pattern of Nifty started to correct after touching a new lifetime high of 7700 and forming a ‘reversal week’ pattern (higher high, lower close) in the previous week.

Weekly technical indicators are still in their respective overbought zones. ROC has just crossed below its 10 week MA. RSI is drifting down. But MACD and Slow stochastic are moving up. The conflicting signals are suggesting that the correction may not last long.

The long-term up trend line (marked 1-1) seems to have lost its near-term relevance, as Nifty is trading more than 1500 points above it. A new up trend line from the Aug ‘13 low (marked 2-2) has been drawn. Henceforth, the new up trend line will be treated as the next leg of the bull market.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices are consolidating after touching new lifetime highs. Bull market corrections/consolidations provide adding opportunities. Choose stocks that are steady compounders rather than ‘rockets’ that move up sharply and then fall just as rapidly. The name of the game is ‘preservation of capital’.

BSE Sensex and NSE Nifty 50 index chart patterns – Jun 13, 2014

An external event has dampened bullish market sentiments. The turmoil in Iraq has caused oil prices to rise, which will affect India’s current account deficit and inflation – putting paid to any hopes of an interest cut by RBI in the near term.

So far, the oil price rise is merely speculative as Iraq’s major oil fields are in the southern part of the country where the Sunni rebels are yet to gain control. It is unlikely that the western countries will sit back and let these oil fields fall into the hands of rebels.

However, it has provided bears with an opportunity to get back in the game. In last week’s analysis, overbought conditions and negative divergences visible on daily and weekly technical indicators had provided advance warning of corrections in both Sensex and Nifty indices.

BSE Sensex index chart

Some bearish signals are visible on the daily bar chart pattern of Sensex:

1. The upward break out from the symmetrical triangle was expected to be followed by a pullback towards the top of the triangle. Instead, it is looking like an ‘end run’ (‘false’ break out) that may drop the index below the triangle
2. The vertical distance between the 50 day EMA and 200 day EMA has reached 2000 points. It has been observed that a major correction often follows such a condition.
3. All four technical indicators have started correcting overbought conditions. Though still in bullish zones, their downward momentum is increasing.

There is a possibility of the index dropping down to fill the ‘gap’ formed on the chart on May 13 ‘14. Contrary to popular belief, a part or complete filling of the ‘gap’ has bullish implications. The index is expected to resume its up move subsequently.

Note that the long-term bull market is intact. That means any correction may be used as an adding opportunity. Should you short the index? You may, if you are a short-term trader. But long-term investors should stay long. However, profits can be booked in small-cap and mid-cap stocks that have risen sharply.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty has formed a ‘reversal week’ pattern (higher high, lower close) after touching a new lifetime high. That has bearish implications. Note that a similar pattern was formed two weeks back, but with a difference. The index didn’t touch a new high then.

Weekly technical indicators are in their respective overbought zones, but beginning to correct. MACD is still moving up, but its upward momentum is slowing down. ROC has started to slide down to its rising 10 week MA. RSI and Slow stochastic have started moving down.

Nifty is still trading 10% above its 20 week EMA, and needs to correct some more to restore the technical ‘health’ of the chart.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices have started correcting after touching new lifetime highs. Bull market corrections provide adding opportunities. But don’t jump in feet first. Be cautious, and very selective.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jun 06, ‘14

S&P 500 Index Chart

The 6 months daily bar chart pattern of S&P 500 consolidated a bit near its previous week’s high of 1924 before charging up towards the 1950 level – stopping just half a point short. Another week – another new high. To paraphrase an old song by Ace: How long will this be going on?

Technical indicators have been ‘flashing red’ for a while, with all three inside their overbought zones. Volumes have been moderate and sliding. The index is trading more than 40 points above its 20 day EMA. The vertical distance between the 50 day and 200 day EMAs is increasing.

All of the above point to an overbought market that is ripe for a correction. But a market can remain overbought for long periods. So, no need to sell in a hurry. But partial profit booking is always a good idea when a market is at a lifetime high.

It’s a bull market. Stay invested with a trailing stop-loss and enjoy the ride.

FTSE 100 Index Chart

The 6 months daily bar chart pattern of FTSE 100 has been consolidating sideways within a ‘symmetrical triangle’ pattern after touching a high of 6895 on May 15. Triangles tend to be continuation patterns, so the eventual break out should be upwards.

However, triangles are unreliable. So, it is better to wait for the eventual break out before taking a buy/sell decision. All three EMAs are rising, and the index is trading above them in a bull market. Corrections and consolidations improve the technical ‘health’ of stock charts and provide them ‘energy’ to move higher.

Daily technical indicators are in downtrends, but not looking too bearish. MACD is sliding below its signal line in positive territory. RSI and Slow stochastic have moved up to their respective 50% levels after falling below them.

A break out can occur at any time. An upward break out should be accompanied by a volume spurt to validate the break out. Stay invested.

Bottomline? Daily bar chart patterns of S&P 500 and FTSE 100 are in long-term bull markets. S&P 500 reached another new lifetime high. FTSE 100 is consolidating within a triangle after touching a new lifetime high last month. Book partial profits, or stay invested with trailing stop-losses.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – May 25, ‘12

S&P 500 Index Chart

In last week’s analysis of the S&P 500 index chart pattern, the oversold conditions in the technical indicators had signalled an upward bounce. But the bounce wasn’t expected to be a strong one because of prevailing bearish sentiment due to the Facebook IPO flop.

The index managed to close above its 200 day EMA on all five days in a desperate bid to remain in a bull market, but failed to make much upward progress. The S&P 500 appears to be consolidating within a symmetrical triangle pattern, which can eventually turn out to be a rectangular ‘flag’ pattern or a ‘rising wedge’ pattern. Either way, such consolidation patterns tend to be continuation patterns – so the likely break out from the pattern should be downwards.

The technical indicators have corrected oversold conditions. The MACD is negative and below its signal line, but has stopped falling. Both the RSI and the slow stochastic have emerged from their oversold zones. But the upward momentum is weak. A repetition of the strong rally from the Dec ‘11 low is unlikely.

No need to sell in a panic. The 50 day EMA is well above the 200 day EMA, and as mentioned in an earlier post, 1250 – 1300 is a strong support zone.

FTSE 100 Index Chart

Selling exhaustion and oversold technical indicators of the FTSE 100 chart led to a week-long consolidation within a symmetrical triangle pattern. Once the pattern gets completed, the down move should resume. The ‘death cross’ of the 50 day EMA below the 200 day EMA has technically confirmed a return to a bear market.

The technical indicators are bearish, but correcting oversold conditions. The MACD is negative and below its signal line, but is not falling. The RSI has emerged from its oversold zone. The slow stochastic is still inside its oversold zone, but attempting to climb out.

All eyes should be on the outcome of the elections in Greece next month. If Greece decides to leave the Eurozone, Spain and Portugal may follow them. Monetary union without political union was an interesting experiment that may be reaching a failure point.

Bottomline? The S&P 500 chart shows that bulls are still fighting it out with the bears. Book part profits or hold with a suitable stop-loss. There is little doubt about which side is winning on the FTSE 100 battlefront. Every rise will be a selling opportunity.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Apr 27, ‘12

S&P 500 Index Chart

In last week’s technical analysis of the S&P 500 index chart pattern, the following observations were made: “… S&P 500 index shows consolidation within a symmetrical triangle for the past two weeks … Triangles tend to be continuation patterns, which means that the likely break out will be below the triangle. But triangles are quite unreliable, so it may be better to wait for the break out.”

The technical indicators were bearish, so the likelihood of a downward break had seemed higher. However, as often happens with triangles, the actual break out was upwards – probably a bear trap planned by bulls. Short covering aided the break out.

Upward break outs require strong volumes to sustain. Have a look at the last three volume bars as the index broke out above the 20 day EMA and the triangle. Volumes were not significantly higher. In fact, on Fri. Apr 27 ‘12, volumes dropped as the index rose above the 1400 level. That keeps open the possibility of a ‘false’ break out.

The technical indicators have turned bullish. The slow stochastic and the RSI have both climbed above their 50% levels. The MACD has crossed above its signal line into positive territory. The ROC has also entered positive territory, but is turning down. The bears can be expected to fight back. But remember that the S&P 500 is in a bull market. So, corrections should be used as adding opportunities.

FTSE 100 Index Chart

The 6 months bar chart pattern of the FTSE 100 index shows another brave effort by the bulls to loosen the bear stranglehold. Once again, the 50 day EMA played spoilsport by thwarting the bull rally. Technically, the index is in a bull market as it is trading above the 200 day EMA. But the bulls are standing on thin ice.

The technical indicators are mildly bullish. Both the slow stochastic and the RSI have just about crossed above their 50% levels. The MACD has moved above its signal line, but remains negative. The ROC made a sharp recovery to climb into positive territory, but is turning down. The bears may be in temporary retreat, but can fight back at any time.

Bottomline? The chart pattern of the S&P 500 index shows that the bulls are regaining the upper hand. Buy the dips. Not so for the FTSE 100 chart, where the bears are pressing the sell button every time there is an attempt to mount a rally. Sell the rallies or sit out the correction.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Apr 20, ‘12

S&P 500 Index Chart

The 3 months bar chart pattern of the S&P 500 index shows consolidation within a symmetrical triangle for the past two weeks, after correcting from the peak of 1422 reached on Apr 2 ‘12. Triangles tend to be continuation patterns, which means that the likely break out will be below the triangle. But triangles are quite unreliable, so it may be better to wait for the break out.

Can the S&P 500 fall a lot? It seems unlikely at this stage. Note that the 200 day EMA is rising and the index is trading well above its long-term moving average. No need for bulls to panic. The 1340 level had acted as a support in Feb and Mar ‘12. The Jan 26 ‘12 top of 1333 is another support level. The downward target from the symmetrical triangle is also around 1340.

The technical indicators are bearish and supporting a likely break below the triangle. The slow stochastic and the RSI are both below their 50% levels. The MACD is below its signal line and has entered the negative zone. The ROC is close to its oversold level of –50.

A drop below the support zone of 1333 – 1340 will form a bearish pattern of lower tops and lower bottoms, which can open the doors to a deeper correction.

FTSE 100 Index Chart

The 3 months bar chart pattern of the FTSE 100 index shows a spirited fight back by the bulls, but to no avail. The 200+ points rally from the intra-day low of 5576 (on Apr 11 ‘12) to the intra-day high of 5792 (on Apr 19 ‘12) failed to cross the resistance of the falling 50 day EMA. The index continues to trade in a bearish pattern of lower tops and lower bottoms and should resume its down trend.

The technical indicators are still bearish, but showing some signs of a turn around. The slow stochastic has risen from its oversold zone but is yet to cross the half-way mark of 50%. The RSI has just managed to get its nose above the 50% level. The MACD has crossed above its signal line, but is inside the negative zone. The ROC found strong resistance from the ‘0’ line and is falling deeper into negative territory.

Technically a bear market has not been confirmed yet, but things are not looking good for the bulls.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are still under bear attacks. The bulls are still in reasonably good shape in the US market. But the bears are gaining ground in the UK market. Stay on the sidelines and let the corrections play out.