The Festival of Colours failed to enthuse FIIs, who were net sellers of equity on all four trading days of a holiday-shortened week. Their total net selling was worth a massive Rs 196.14 Billion. DIIs were net buyers of equity on all four days. Their total net buying was worth Rs 175.96 Billion, as per provisional figures.
India's Current Account Deficit (CAD) declined to 0.2% of GDP during Oct-Dec '19 from 0.9% during Jul-Sep '19 and 2.7% during Oct-Dec '18. The contraction in CAD was due to lower trade deficit and higher services receipts.
CPI-based inflation eased to 6.58% in Feb '20 from 7.59% in Jan '20. It was the first decline in 7 months, thanks to lower food prices.
BSE Sensex index chart pattern
The following comments from last week's post on the daily bar chart pattern of Sensex are worth noting:
"The impending 'death cross' of the 50 day EMA (blue) below the 200 day EMA will technically confirm a bear market."
"If Sensex breaches 36000, it can fall to its 200 week EMA (currently at 34800)."
The 36000 level, which had acted as a support during Aug-Sep '19, was easily breached on Mon. Mar 9. As often happens, the breached support level turned into a resistance level during a pullback on the next trading day (Mar 11).
Sensex formed a downward gap of 790 odd points on Thu. Mar 12, as bears pressed home their advantage. Panic selling on Fri. Mar 13 caused a circuit breaker and a 45 min. trading halt. On reopening of trade, huge short covering led to a sharp technical bounce that partly filled Thursday's 'gap'.
A partly or completely filled downward 'gap' is usually followed by a resumption of the down move. Note that the current level of the 200 week EMA (not shown) is 34450, which is just above Thursday's downward 'gap'. The zone between 34450-36000 should act as a strong resistance.
Friday's panic selling that dropped the index below 30000 - its lowest level in 3 years - may be a sign of capitulation by bulls that marks the end of a bull market. The 'death cross' of the 50 day EMA below the 200 day EMA - marked by grey oval - has technically confirmed a bear market. Thursday's closing level of 32778 was a 22.5% fall from Jan 20th top of 42274. A fall of 20% from the top is another technical sign of a bear market.
Can Friday's sharp fall below 30000, and the subsequent sharp recovery, be termed as a 'selling exhaustion'? The short answer is: No. A 'selling exhaustion' is a sign of capitulation by bears that typically happens after a prolonged downward move. Also, trading volumes should be significantly higher - which was not the case on Friday (Mar 13).
Daily technical indicators are in bearish zones and looking oversold. MACD is falling deeper inside its oversold zone. RSI is trying to emerge from its oversold zone. Slow stochastic has emerged from its oversold zone after re-entering it.
Since 'panic bottoms' seldom hold, expect Friday's intra-day low of 29389 will be tested and breached. Any continuation of Friday's short-covering pullback can be used to exit non-performing stocks in portfolios.
NSE Nifty index chart pattern
What a difference a week makes! The weekly bar chart pattern of Nifty formed a 76 points downward 'gap', crashed through its 200 week EMA and plummeted below 8600 - its lowest level in 3 years.
A circuit breaker and trading halt of 45 mins on Fri. Mar 13 led to a sharp short-covering pullback that stopped short of the support level of 10000. The support level should now become a resistance level. A bullish pattern of 'higher tops, higher bottoms' - formed during the past 18 months - has been negated.
The index fall below the 200 week EMA with a downward 'gap' is a sign that the long-term bull market has come to an end. The rapidly spreading corona virus has spooked global stock markets and FIIs, who have pulled out more than Rs 300 Billion during the past two weeks.
Weekly technical indicators are looking bearish and oversold. MACD is falling sharply in bearish zone. RSI and Slow stochastic have entered their respective oversold zones. Friday's short-covering bounce may last a bit longer before bears resume their selling.
Nifty's TTM P/E has moved down to 22.66, but still remains above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling inside its oversold zone. Some more near-term index pullback or some consolidation is possible.
Bottomline? Sensex and Nifty charts have closed well below their respective 200 week EMAs - signalling the end of long-term bull markets. A rapidly spreading corona virus has exacerbated uncertainty and concerns about weak economic growth and fiasco in the financial sector. Small investors should stay on the sidelines and use pullback rallies to move out of non-performing stocks.
India's Current Account Deficit (CAD) declined to 0.2% of GDP during Oct-Dec '19 from 0.9% during Jul-Sep '19 and 2.7% during Oct-Dec '18. The contraction in CAD was due to lower trade deficit and higher services receipts.
CPI-based inflation eased to 6.58% in Feb '20 from 7.59% in Jan '20. It was the first decline in 7 months, thanks to lower food prices.
BSE Sensex index chart pattern
The following comments from last week's post on the daily bar chart pattern of Sensex are worth noting:
"The impending 'death cross' of the 50 day EMA (blue) below the 200 day EMA will technically confirm a bear market."
"If Sensex breaches 36000, it can fall to its 200 week EMA (currently at 34800)."
The 36000 level, which had acted as a support during Aug-Sep '19, was easily breached on Mon. Mar 9. As often happens, the breached support level turned into a resistance level during a pullback on the next trading day (Mar 11).
Sensex formed a downward gap of 790 odd points on Thu. Mar 12, as bears pressed home their advantage. Panic selling on Fri. Mar 13 caused a circuit breaker and a 45 min. trading halt. On reopening of trade, huge short covering led to a sharp technical bounce that partly filled Thursday's 'gap'.
A partly or completely filled downward 'gap' is usually followed by a resumption of the down move. Note that the current level of the 200 week EMA (not shown) is 34450, which is just above Thursday's downward 'gap'. The zone between 34450-36000 should act as a strong resistance.
Friday's panic selling that dropped the index below 30000 - its lowest level in 3 years - may be a sign of capitulation by bulls that marks the end of a bull market. The 'death cross' of the 50 day EMA below the 200 day EMA - marked by grey oval - has technically confirmed a bear market. Thursday's closing level of 32778 was a 22.5% fall from Jan 20th top of 42274. A fall of 20% from the top is another technical sign of a bear market.
Can Friday's sharp fall below 30000, and the subsequent sharp recovery, be termed as a 'selling exhaustion'? The short answer is: No. A 'selling exhaustion' is a sign of capitulation by bears that typically happens after a prolonged downward move. Also, trading volumes should be significantly higher - which was not the case on Friday (Mar 13).
Daily technical indicators are in bearish zones and looking oversold. MACD is falling deeper inside its oversold zone. RSI is trying to emerge from its oversold zone. Slow stochastic has emerged from its oversold zone after re-entering it.
Since 'panic bottoms' seldom hold, expect Friday's intra-day low of 29389 will be tested and breached. Any continuation of Friday's short-covering pullback can be used to exit non-performing stocks in portfolios.
NSE Nifty index chart pattern
What a difference a week makes! The weekly bar chart pattern of Nifty formed a 76 points downward 'gap', crashed through its 200 week EMA and plummeted below 8600 - its lowest level in 3 years.
A circuit breaker and trading halt of 45 mins on Fri. Mar 13 led to a sharp short-covering pullback that stopped short of the support level of 10000. The support level should now become a resistance level. A bullish pattern of 'higher tops, higher bottoms' - formed during the past 18 months - has been negated.
The index fall below the 200 week EMA with a downward 'gap' is a sign that the long-term bull market has come to an end. The rapidly spreading corona virus has spooked global stock markets and FIIs, who have pulled out more than Rs 300 Billion during the past two weeks.
Weekly technical indicators are looking bearish and oversold. MACD is falling sharply in bearish zone. RSI and Slow stochastic have entered their respective oversold zones. Friday's short-covering bounce may last a bit longer before bears resume their selling.
Nifty's TTM P/E has moved down to 22.66, but still remains above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling inside its oversold zone. Some more near-term index pullback or some consolidation is possible.
Bottomline? Sensex and Nifty charts have closed well below their respective 200 week EMAs - signalling the end of long-term bull markets. A rapidly spreading corona virus has exacerbated uncertainty and concerns about weak economic growth and fiasco in the financial sector. Small investors should stay on the sidelines and use pullback rallies to move out of non-performing stocks.
2 comments:
Namaskar Subhankarji,
Thank you for providing clarity on end of bull market.
I learnt a few things by reading your blog posts from earlier.
1) Panic bottoms seldom hold
2) Closing below EMA (or above it) should be considered valid only after it holds it (below or above EMA respectively) for 3 consecutive days (i remember reading about it for a daily chart)
Am guessing this 3 period rule holds for weekly as well
If we close above 200 weekly EMA (for ex if they find a vaccine & or a very effective cure) in the next 2 weeks after retouching the bottom again, should we consider that we are reentering the bull market (by virtue of closing above 200 weekly EMA) ?
Please provide your insights !
Thank you for your response & teaching us here.
Pranam
Anand
Appreciate your comments, Anand.
Please look at Sensex/Nifty weekly charts during the bear market of 2008. The pullback in July breached the 200 week EMA from below, only to crash lower once again.
So, I will remain cautious till I see a bottom formation.
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