S&P 500 and FTSE 100 charts (Dec 15 '17): bulls keep charging ahead

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 faced a brief dip on Wed. & Thu. (Dec 13 & 14), which was gleefully bought by bulls. The index rose to touch another new high of 2680 on Fri. Dec 15 - on the back of a sharp rise in volumes - before closing slightly lower.

All three EMAs are rising and the index closed well above them in a bull market with a weekly gain of 0.9%. However, the volume spike on Fri. may be the sign of a buying climax. 

Investors pulled $16.2 billion from U.S.-based equity funds during the latest week, according to Lipper on Thu. Dec 14, marking the largest withdrawals since December 2016.

Daily technical indicators are looking bullish but overbought. An index can remain overbought for long periods. Negative divergences visible on RSI and Slow stochastic (both failed to touch new highs with the index) can lead to another corrective dip.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking overbought. Slow stochastic failed to touch a new high with the index, and can trigger a correction towards the rising 20 week EMA. 

FTSE 100 index chart pattern

For the third time in 3 months, the daily bar chart pattern of FTSE 100 attempted a breakout above the (purple) down trend line that has dominated the chart since early Jun '17.

The index rose to touch a high of 7511 on Wed. Dec 13 but formed a small 'reversal day' (higher high, lower close) bar that triggered a pullback to the down trend line on Fri. Dec 15. 

However, the index bounced up from the trend line to form a large 'reversal day' (lower low, higher close) bar, and closed with a weekly gain of 1.3%.

Daily technical indicators are looking bullish. MACD has entered positive zone after a month. RSI is above its 50% level. Slow stochastic is moving down inside its overbought zone, and can limit index upside. (At the time of writing this post, the index is trading above its Wed. top of 7511.) 

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 and showing upward momentum.

Sensex, Nifty charts (Dec 15, 2017): poised to breakout above 'flag' patterns

FIIs and DIIs were both net sellers of equity in the week gone by. FII net selling was worth Rs 6.1 Billion. DII net selling was worth Rs 6 Billion.

Incidentally,  FIIs were net buyers on Tue. & Thu. while DIIs were net buyers on Mon. & Fri. Sensex and Nifty gained 0.6% on a weekly closing basis while consolidating sideways within bullish 'flag' patterns.

India's WPI inflation rose to an 8 months high of 3.93% in Nov '17, against 3.59% in Oct '17 and 1.82% in Nov '16 - on the back of higher food and oil prices.

Exports were up 30.6% while imports were up 19.6% YoY in Nov '17. Exports were worth $ 26.2 Billion against imports of $ 40 Billion - leaving a trade deficit of $ 13.8 Billion (higher than $ 13.4 Billion in Nov '16 but lower than $ 14 Billion in Oct '17).

BSE Sensex index chart pattern

Note the following remarks in last week's post on the daily bar chart pattern of Sensex: "The index needs to cross convincingly above its previous (Nov 28) top of 33770 for bulls to wrest control. Bears may try to prevent that from happening - at least till Gujarat state election results are announced."

Exit polls on Thu. Dec 14 predicted comfortable victories for NDA in Gujarat and Himachal Pradesh state elections. Bulls celebrated. The index formed an upward 'gap' on Fri., but stopped short of the upper edge of the 'flag' pattern and the Nov 28 top of 33770.

It seems bulls and bears were uncertain about the actual election results (to be announced on Mon. Dec 18). That uncertainty was reflected in the formation of a 'shooting star' candlestick pattern on Fri. Dec 15.

Daily technical indicators are looking bullish, even though RSI is still in bearish zone. ROC is showing strong upward momentum, the others are not.

The index is trading above its three EMAs in a bull market. An upward breakout above the 'flag' pattern appears inevitable. Whether the breakout will be followed by a pullback to the top of the 'flag' or not may depend on the margin of NDA's victory in the two states.

Remember that to be technically valid, any upward breakout should be accompanied by a significant increase in volumes.

NSE Nifty index chart pattern

For the past 6 weeks, the weekly bar chart pattern of Nifty has been consolidating within a 'flag' pattern, from which an upward breakout is likely. 

Despite exit poll predictions of comfortable NDA victories in recently concluded Gujarat and Himachal state elections, the index failed to breakout above the 'flag' last week.

Weekly technical indicators are in bullish zones. Only RSI is showing some upward momentum. MACD, RSI and Slow stochastic are showing downward momentum.

Nifty's TTM P/E has increased to 26.46 - well above its long-term average. A few experts on business TV channels have been proffering clever arguments to justify the high index valuation. Ignore them. Once election results are out of the way, market focus will shift to continued meagre earnings of India Inc.

The breadth indicator NSE TRIN (not shown) has fallen sharply in neutral zone and is hinting at some more index upside. With FIIs in selling mood, don't expect a runaway rally.

Bottomline? Sensex and Nifty charts have been consolidating within bullish 'flag' patterns for the past 6 weeks. Upward breakouts from 'flag' patterns are likely. Breakouts - and any subsequent pullbacks - can be used to add to existing holdings.

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Nifty chart: a midweek technical update (Dec 13 ‘17)

During the first three days of trading this week, FIIs were net buyers of equity worth Rs 0.8 Billion. DIIs were net sellers of equity worth Rs 8.6 Billion, as per provisional figures. Interestingly, both were net sellers of equity today. Nifty lost 73 points (0.7%).

There has been a setback in India's macroeconomic front. CPI inflation increased to a 15 months high of 4.88% in Nov '17 against 3.58% in Oct '17 due to rising food and oil prices. RBI may have no option but to raise interest rates.

The Index of Industrial Production (IIP) slowed to 2.2% in Oct '17 against an upwardly revised 4.14% in Sep '17 due to a contraction in consumer durable goods production for the second straight month.

The following remarks were made in last week's update on the daily bar chart pattern of Nifty: "Can the index bounce up from here? Technical signals...are conducive, but a sharp rally - like the one during Oct '17 - seems unlikely."

On Wed. Dec 6, the index was testing support from its 100 day EMA (not shown), and did bounce up above its 20 day and 50 day EMAs during the next three trading sessions. 

Bears sold the rise and pushed the index to a close below its 50 day EMA today. By bouncing up after touching an intra-day low of 10033 on Dec 6, a bullish 'flag' pattern has been formed.

Nifty has been consolidating within the 'flag' for the past 5 weeks - after touching a lifetime high of 10490 on Nov 6. Since a 'flag' is usually a continuation pattern, the expected breakout is upwards.

Daily technical indicators are looking bearish and showing downward momentum. MACD and RSI are in bearish zones. Slow stochastic is in bullish zone. Some more correction within the 'flag' is possible.

Nifty's TTM P/E is at 26.1 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone - and can limit index downside. 

Bulls seem undecided about the likely outcome of Gujarat state elections. Anything short of a majority for NDA can lead to more index correction.

Nifty is trading above its rising 200 day EMA in a bull market. Dips can be used to add to existing holdings. Buy more on a convincing breakout above the 'flag' - whenever that occurs.

Gold and Silver charts: reeling from strong bear attacks

Gold chart pattern

The following comments were made in the previous post on the daily bar chart pattern of Gold: "Slow stochastic has risen towards its overbought zone, and can limit further upside in gold's price...Strong volume bars on recent down days mean bears are not going to yield much further ground without a proper fight."

On Nov 27, gold's price had touched an intra-day high of 1303.40, but slipped down to close just below the 'resistance zone'. The next day, it touched a slightly lower high of 1301.30, but formed a 'doji' candlestick pattern by opening and closing at almost the same level just below the 'resistance zone'.

That was a sign of indecision and weakness that bears exploited to the hilt. Gold's price plummeted below its three EMAs into bear territory, and is trying to form a bottom at 1245.

Daily technical indicators are looking bearish and oversold. More correction can't be ruled out. However, a pullback towards the 200 day EMA can occur at any time. That will provide a selling opportunity.

On longer term weekly chart (not shown), gold’s price closed below its three weekly EMAs in long-term bear territory.  Weekly technical indicators are showing downward momentum in bearish zones. Slow stochastic has re-entered its oversold zone, and can trigger a pullback.

Silver chart pattern

The following comments were made in the previous post on the daily bar chart pattern of Silver: "..one needs to wait for the eventual breakout (or not) to decide whether to buy, sell or hold. Strong volumes on recent down days mean bears may have a slight edge."

On Nov 29, silver's price broke out below the 'symmetrical triangle' pattern within which it was consolidating during Oct & Nov '17. It then dropped down vertically like a stone to the 'support zone' (between 15.25 & 15.75).

All three EMAs are falling, and silver's price is trading well below them in a bear market. Daily technical indicators are looking bearish and oversold. That can trigger a technical bounce, which will provide bears another opportunity to sell.  

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 looking bearish and showing downward momentum. Slow stochastic is deep inside its oversold zone, and can trigger a pullback.

S&P 500 and FTSE 100 charts (Dec 08 '17): bulls gaining ground

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 continued its gravity-defying rally by touching another new high of 2665 on Mon. Dec 4, but formed a 'reversal day' bar (higher high, lower close). 

That triggered a brief correction down to 2624.75 on Wed. Dec 6. Bulls bought the dip once again. The index closed above 2650 with a small 0.3% gain on a weekly closing basis.

The index is trading above its three rising EMAs in a bull market. Daily technical indicators are in bullish zones. MACD and RSI are looking overbought.

Despite the relentless rise of the index and bull's 'buy the dip' strategy, strong volumes on recent down-days indicate that bears remain active. Smart money is probably booking profits. 

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market, but formed a bearish 'hanging man' candlestick pattern. Weekly technical indicators are quite overbought. Slow stochastic failed to touch a new high with the index, and can trigger a correction to the rising 20 week EMA. 

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 oscillated about its 200 day EMA during the first four days of trading. By touching an intra-day low of 7289 on Wed. Dec 6, the index formed a small 'double bottom' reversal pattern.

On Fri. Dec 8, the index rose sharply above its 200 day and 20 day EMAs and the 7400 level with a volume surge (not shown) - only to face strong resistance from its falling 50 day EMA. It closed just below 7400, with a gain of 1.3% on a weekly  closing basis.

Daily technical indicators are showing upward momentum. MACD and Slow stochastic are rising in bearish zones. RSI has moved up to its neutral zone. 

A convincing move above the (purple) down trend line is required if bulls wish to shake off bear shackles. (At the time of writing this post, bulls are in the midst of an attempt to do so.)

On longer term weekly chart (not shown), the index bounced up to close just below its 20 week EMA, but above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is below its signal line in bullish zone. RSI  and Slow stochastic are in neutral zones, and slowing slight upward momentum.

Sensex, Nifty charts (Dec 08, 2017): bounce up from support levels but not out of the woods yet

Last week, FIIs were net sellers of equity worth Rs 47.7 Billion, as per provisional figures. DIIs were net buyers of equity worth Rs 50.1 Billion.

Sensex gained 417 points (1.3%) and Nifty gained 144 points (1.4%) on a weekly closing basis. Both indices are consolidating sideways with downward biases for the past 5 weeks.

Loan growth of banks hit a 3 years high of 9.6% in Nov '17, against 6.6% in Nov '16 and 9.3% in Nov '15, according to provisional RBI data. Low base effect may have contributed to the higher growth number. Since Oct '17, trend in loan growth to large corporate houses has turned positive.

BSE Sensex index chart pattern

The following comments in last week's post on the daily bar chart pattern of Sensex may be noted: "Some more correction is possible. But bears should not get too enthusiastic. The index is close to the upper edge of the downward-sloping channel, which had provided good support on Nov 15 - and may do so again."

As expected, the index corrected during the first three days of the week to the upper-end of the downward-sloping channel - only to bounce up after receiving good support. 

The index closed above its 50 day EMA on Thu. Dec 7. On Fri., it formed an upward 'gap' of 42 points and closed above its 20 day EMA. So, is the correction-cum-consolidation over?

Not yet. The index needs to cross convincingly above its previous (Nov 28) top of 33770 for bulls to wrest control. Bears may try to prevent that from happening - at least till Gujarat state election results are announced.

Daily technical indicators are showing signs of turning bullish. MACD has stopped falling, and is at its neutral zone. ROC and Slow stochastic have emerged from their respective oversold zones. RSI is rising towards its neutral zone.

If the index continues to rally, resistance can be expected from the zone between 33700 and 33900. 

NSE Nifty index chart pattern

The following comments were made in last week's post on the weekly bar chart pattern of Nifty: "Some more correction can't be ruled out. But proximity to the 'support/resistance zone' between 10100 and 9700 should stall a deeper correction."

The index corrected below its rising 20 week EMA into the 'support/resistance zone' intra-week, but bounced up to close above its three weekly EMAs in a bull market.

For the past 5 weeks, the index has been consolidating within a downward-sloping channel. A convincing upward breakout above the channel will restore control of the chart to bulls.

Weekly technical indicators are in bullish zones. Only ROC is showing upward momentum. MACD, RSI and Slow stochastic are moving sideways.

Nifty's TTM P/E has increased to 26.26 - well above its long-term average. The breadth indicator NSE TRIN (not shown) has fallen sharply from its oversold zone and is hinting at some more index upside.

Bottomline? Sensex and Nifty charts have bounced up from important support levels that were successfully tested three weeks back. Both indices may continue their rally next week, but need to overcome resistance zones.