S&P 500 and FTSE 100 charts (Jun 08, 2018): bulls gaining ground

S&P 500 index chart pattern

The following remarks were made in last week's post on the daily bar chart pattern of S&P 500: "Bulls may make another attempt to fill 'GAP 2' - either partly or completely. Their previous two attempts had failed. May be it will be 'third time lucky'? Even if it is, the upper edge of 'GAP 2' can provide tougher resistance."

Bulls did make another attempt to fill 'GAP 2' and were 'third time lucky' by completely filling it. On Wed. Jun 6, the index overcame resistance from the upper edge of 'GAP 2' and closed above the 'Flag' pattern.

Next day, the index pulled back to the top of the 'Flag' after facing resistance from the 2780 level - giving bulls a chance to 'buy the dip'. On Fri. Jun 8, the index bounced up to close just below 2780 with a 1.6% weekly gain.

Daily technical indicators are looking bullish and a bit overbought. MACD has entered its overbought zone. RSI is trying to rise towards its overbought zone. Slow stochastic is inside its overbought zone, and showing negative divergence by failing to rise higher with the index.

Note that Friday's higher close was on weaker volumes. Bears may use the opportunity to force bulls to retreat. Any further rally is likely to face resistance from the 2810 level. 'GAP 1' - which has remained unfilled for more than 4 months - is going to provide stronger resistance.

The index is trading above its three rising EMAs. The long-term structure of the chart remains bullish.

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

FTSE 100 index chart pattern

The following remark appeared in last week's post on the daily bar chart pattern of FTSE 100: "The index may attempt to cross above its Jan '18 top of 7793 after some more consolidation in the zone between 7610 and 7793." 

As expected, the index consolidated in the zone between 7610 and 7793 during the week. On Fri. Jun 8, the index dropped sharply below its 20 day EMA to an intra-day low of 7638, but closed above it - forming a 'hammer' candlestick that has bullish implications. (At the time of writing this post, FTSE is trading 38 points higher.)

Daily technical indicators are looking bearish. MACD and RSI are falling in bullish zones. Slow stochastic is trying to recover after falling into bearish zone. Some more consolidation is likely. The index is trading above its three rising EMAs in a bull market. 

On longer term weekly chart (not shown), the index closed well above its  three weekly EMAs in a long-term bull market, but formed a 'doji' candlestick that shows indecision among bulls and bears. Weekly MACD is rising inside its overbought zone. RSI is rising above its 50% level. Slow stochastic is about to fall from its overbought zone.

Sensex, Nifty charts (Jun 08, 2018): bulls try to charge but bears lurk in the shadows

FIIs were net buyers of equity worth Rs 13.7 Billion during the week. All their net buying occurred on Mon. Jun 4, when ESOP allottments at HDFC Bank brought down FII threshold limit, allowing them to add to their HDFC Bank holdings. They were net sellers during the rest of the week.

DIIs were net buyers of equity worth Rs 21.3 Billion, as per provisional figures. They were net sellers on Mon. Jun 4, and net buyers during the rest of the week. Sensex and Nifty gained about 0.6% each on a weekly closing basis.

Nikkei India Services PMI declined to 49.6 in May '18 from 51.4 in Apr '18. Service sector output dipped into contraction (below 50) for the first time in three months. The Composite PMI (Manufacturing + Services) slipped to 50.4 in May '18 from 51.9 in Apr '18.

The Serious Fraud Investigation Office (SFIO) has drawn up a list of more than 113,000 shell companies as the government prepares for another onslaught on black money. The database compiled by SFIO has red-flagged more than 80,000 companies suspected to be shell entities while it has confirmed illegal activities in 16,537 of them.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex corrected during the first two days of the week, falling below its 20 day EMA and the 132 points downward 'gap' intra-day on Tue. Jun 5 before managing to close just inside the 'gap'.

The index bounced up the next day - despite an interest rate hike by RBI - and ended the week above its three rising EMAs in bull territory.

Daily technical indicators are in bullish zones. MACD is about to cross above its signal line. RSI is rising towards its overbought zone. Slow stochastic has entered its overbought zone. ROC, however, has turned down after facing resistance from the edge of its overbought zone.

Sensex is trading below the down trend line (drawn through the Jan 29 and May 15 tops), keeping bulls in check. A bearish 'hanging man' candlestick formed on Fri. May 8. The index has been trading within a bearish 'rising wedge' pattern for the past three weeks.

Bears are not giving up just yet. A fall below the 'rising wedge' may lead to a test of support from the 'Support/Resistance zone'. The balance can swing toward bulls if the index moves above the down trend line.

The rising 200 day EMA is a clear indication that the long term structure of the chart remains bullish.

NSE Nifty index chart pattern

After three weekly closes below the 33 points downward 'gap', the weekly bar chart pattern of Nifty managed to close above the 'gap', and is trading above its rising weekly EMAs in a bull market. 

However, the index is still below the down trend line, and formed a weekly 'dragonfly doji' bar that can set off a corrective move.

Weekly technical indicators are in bullish zones. MACD has managed to cross above its signal line. RSI is moving above its 50% level. Slow stochastic is just below its overbought zone. But ROC is looking a bit bearish by starting to correct inside its overbought zone.

Nifty's TTM P/E has moved up to 27.27 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is trying to emerge from its overbought zone, and can trigger a correction.

Bottomline? Bulls are trying to regain control of Sensex and Nifty charts but bears are making their task difficult. Some more consolidation or correction seems likely. Some times it can be a prudent strategy to stay on the sidelines till a clear trend emerges in the near term. Long term chart structures are bullish. 

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Nifty chart: a midweek technical update (Jun 06, 2018)

FIIs were net buyers of equity on Mon. Jun 4 but net sellers during the next two trading days this week. Their total net buying was worth Rs 21.1 Billion. DIIs were net sellers of equity on Mon. Jun 4 but net buyers during the next two trading days. Their total net buying was worth Rs 4.7 Billion, as per provisional figures.

Rising rural demand and government's infrastructure push propped up sales of 2-wheelers and CVs in May '18. Tata Motors, Ashok Leyland, Bajaj Auto, Royal Enfield, Hero Moto, Maruti, Escorts, M&M showed double-digit sales growth.

RBI announced 25 bps (0.25%) increase in repo and reverse repo rates after a 3-day policy meeting today. Increase in interest rates occurred after 4.5 years. The stock market had anticipated the news, and rose on short covering and some value buying.

The daily bar chart pattern of Nifty is continuing to struggle in its efforts to cross above the downward 'gap' formed back in Feb 5.

On three consecutive trading days - May 31, Jun 1, Jun 4 - the index moved above the 'gap' intra-day, but failed to close above it. 

Nifty dropped to close below its 20 day EMA on Jun 4 and dropped further below its 50 day EMA intra-day on Jun 5, but pulled back towards the 'gap' today.

Daily technical indicators are looking neutral to bullish. MACD is entangled with its signal line, and moving sideways in bullish zone. RSI is just above its 50% level in neutral zone. Slow stochastic is trying to move up above its 50% level. Expect bears to resume selling at any time.

Nifty's TTM P/E is at 27.06 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is inside its overbought zone, and may limit near-term index up side.

The activity in the primary markets is set to pick up after a period of lull. More than half a dozen companies are looking to tap the market with their initial public offerings (IPOs) worth a cumulative Rs 200 Billion. That will divert cash from the secondary market.

Oil prices have come down a little, but may go up again post OPEC's meeting on Jun 22. The consolidation-cum-correction below the (purple) down trend line is likely to continue. A fall below the May 23 low of 10418 can lead to a test of support from the rising 200 day EMA.

WTI and Brent Crude Oil charts: bear onslaught forces bull retreat

WTI Crude Oil chart

The following comments appeared in the previous post on the daily bar chart pattern of WTI Crude Oil: "Daily technical indicators are looking overbought and showing negative divergences by failing to touch new highs with oil's price. Falling volumes during the last leg of the rally is also a bearish sign... some correction or consolidation may be on the cards."

Oil's price touched an intra-day high of 72.83 on May 22, but formed a 'reversal day' bar (higher high, lower close) that often marks an intermediate top. A combination of profit booking and bear selling triggered a sharp correction below the 20 day and 50 day EMAs.

A brief upward bounce from the 'Support/Resistance zone' (between 66 & 67) and a close above the 50 day EMA on May 30 was met with more bear selling. Oil's price closed below the 'Support/Resistance zone' after 7 weeks, but above its 200 day EMA in bull territory.

Daily technical indicators are showing downward momentum in bearish zones. Slow stochastic is well inside its oversold zone. A likely pullback towards the 'Support/Resistance zone' will provide bears another selling opportunity.

On longer term weekly chart (not shown), oil's price closed below its 20 week EMA but above its 50 week and 200 week EMAs. Weekly technical indicators have corrected overbought conditions. MACD is falling in bullish zone. RSI is seeking support from its 50% level. Slow stochastic has slipped below its 50% level - hinting at some more correction.

Brent Crude Oil chart

The daily bar chart pattern of Brent Crude Oil formed a small 'double top' reversal pattern by touching 80.50 intra-day on May 17 & 22. That triggered a correction below its 20 day EMA but found good support from 'Support/Resistance zone 2' (between 73 & 75).

Oil's price is trading above its 50 day and 200 day EMAs in bull territory, but the corrective move may continue a while longer.

Daily technical indicators have corrected overbought conditions and are showing downward momentum. MACD is falling in bullish zone. RSI and Slow stochastic are falling below their 50% levels.

On longer term weekly chart (not shown), oil's price closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are correcting overbought conditions. Some more correction and/or consolidation is likely.

S&P 500 and FTSE 100 charts (Jun 01, 2018): bulls yet to come out of the woods

S&P 500 index chart pattern

The following comments were made in last week's post on the daily bar chart pattern of S&P 500: "Slow stochastic has formed a 'double top' reversal pattern inside its overbought zone. Some more consolidation or correction is likely."

After a long weekend, the index dropped to an intra-day low of 2677 on Tue. May 29, and closed below its 20 day and 50 day EMAs at 2690. Bulls used the opportunity to 'buy the dip'. The index rose above its 20 day and 50 day EMAs and closed with a weekly gain of about 0.5%. 

Daily technical indicators are in bullish zones. MACD has merged with its signal line, and is moving sideways. RSI and Slow stochastic briefly dropped below their respective 50% levels before recovering.

Bulls may make another attempt to fill 'GAP 2' - either partly or completely. Their previous two attempts had failed. May be it will be 'third time lucky'? Even if it is, the upper edge of 'GAP 2' can provide tougher resistance.

The two down-days last week (Tue. May 29 and Thu. May 31) had the highest transaction volumes. That is probably a sign of 'distribution' from stronger to weaker hands. 

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing very little upward momentum.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 corrected below its 20 day EMA to an intra-day low of 7610 on Tue. May 29. It bounced up the next day, and closed above its 20 day EMA.

The index consolidated above its 20 day EMA in bull territory till the end of the week, but lost about 0.4% on a weekly closing basis.

Daily technical indicators have corrected overbought conditions. MACD and RSI are showing downward momentum in bullish zones. Slow stochastic is trying to recover after falling below its 50% level.

The index may attempt to cross above its Jan '18 top of 7793 after some more consolidation in the zone between 7610 and 7793. (At the time of writing this post, FTSE is trading about 40 points higher.)

On longer term weekly chart (not shown), the index closed well above its  three weekly EMAs in a long-term bull market, and formed a 'hammer' candlestick that has bullish implications. Weekly MACD is rising inside its overbought zone. RSI is rising above its 50% level. Slow stochastic is correcting inside its overbought zone.

Sensex, Nifty charts (Jun 01, 2018): bears refusing to back off

For the month of May '18, FIIs were net sellers of equity worth Rs 117.3 Billion. DIIs were net buyers of equity worth Rs 152.3 Billion, as per provisional figures.

Sensex barely gained 0.5% on a monthly closing basis, while Nifty closed flat (losing 3 points despite heavy buying by DIIs).

India's GDP growth rate was 7.7% for the Jan-Mar '18 quarter - the fastest growth rate in 7 quarters. For FY 2017-18, GDP growth rate was 6.7%. 

Nikkei India's Manufacturing PMI eased to 51.2 in May '18 from 51.6 in Apr '18. For the 10th straight month, PMI stayed above 50 (which indicates expansion).

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex is continuing to struggle near the 132 points downward 'gap' formed almost 4 months back (on Feb 5).

The index fell and closed inside the 'gap' on Tue. May 29. It fell further on May 30 - below its 20 day EMA and the 'gap' intra-day - but managed to close inside the 'gap'.

On Thu. May 31, the index bounced up to close well above the 'gap' and its three EMAs in bull territory, but formed a 'reversal day' bar (slightly higher high, lower close) and pulled back towards the 'gap'.

Daily technical indicators are looking bullish to neutral. MACD is trying to cross above its falling signal line in bullish zone. ROC has crossed above its 10 day MA, and is rising in bullish zone. RSI has slipped down after facing resistance from its 50% level. Slow stochastic has risen to its 50% level.

Oil's price has come down a little, but government's refusal to lower excise duty has resulted only in a few paisa lower prices for petrol and diesel. Losses in the recent by-polls and farmers' agitation in 10 states are ominous signs for BJP's prospects in forthcoming state and general elections.

RBI may have to tighten monetary policy at its Jun 4-6 '18 meeting. That can trigger off the next leg of the corrective move from the Jan 29 top.

Small investors should concentrate on preserving capital. That means no impulsive or bulk buying. Partial profit booking and reallocation of assets is suggested for those who are itching to 'do something'.

NSE Nifty index chart pattern

The following comments were made in last week's post on the weekly bar chart pattern of Nifty: "Nifty has formed a 'hammer' candlestick that can trigger an up move towards the Feb 5 'gap'. Bears can be expected to 'sell on rise'." 

Some times the index does exactly as expected. Nifty crossed above the 33 points downward 'gap' (formed on Feb 5) intra-week. Bear selling forced a close below the 'gap'.

Along with the 'gap', the down trend line (drawn through the tops formed in the weeks ending on Feb 2 and May 18) is another hurdle that the index will need to overcome before bulls can fully regain control.

Weekly technical indicators are in bullish zones, but only ROC is showing upward momentum. MACD is entangled with its signal line and is moving sideways. RSI is also moving sideways, with a slight upward bias. Slow stochastic has started to slide down after facing resistance from the edge of its overbought zone.

Nifty's TTM P/E is at 27.09 - well above its long-term average. The breadth indicator NSE TRIN (not shown) has dropped like a stone into its overbought zone, and can set off a correction.

Bottomline? The downward 'gaps' formed on Feb 5 on Sensex and Nifty charts are proving to be tough hurdles for bulls. Some more consolidation or correction is likely. At times like these, preservation of capital should take priority over bargain hunting.