Comparing Nifty with Global Indices over the past year

The Indian stock market performed splendidly during the past year. Nifty gained nearly 35% when it hit its peak earlier this month. The subsequent correction pared off some of the gains. Yet Nifty clocked more than 25% gains for the year – which is quite substantial for an index dominated by large-cap stocks.

To put the gains into perspective, Nifty’s one year closing chart (in blue) has been compared with 10 global index charts (in green). With the notable exception of Argentina’s MERVAL index, which handsomely outperformed Nifty during the year, the other 9 indices trailed Nifty’s performance by large margins.

Small investors are flocking back to the Indian market – as can be seen from large inflows into domestic mutual funds – getting attracted by Nifty’s gains during the past year. It is unlikely that there will be a repeat performance from Nifty during 2015-16 fiscal year. However, a 15% gain looks possible – and will still beat bank fixed deposit and debt fund returns.

Australia All Ordinaries (in green) vs. NIFTY

Australia’s stock index dipped into negative zone during Oct ‘14 and Dec ‘14, but managed to eke out about 10% gains during the year.

Austria ATX (in green) vs. NIFTY

Austria’s ATX index gave negative returns through most of the year – managing to close flat for the year.

DAX Germany (in green) vs. NIFTY

Germany’s DAX index oscillated between positive and negative zones till the beginning of 2015. The index rallied spectacularly during the past 3 months, managing to catch up with Nifty’s gains by the end of the year.

France CAC40 (in green) vs. NIFTY

France’s CAC40 index rallied strongly from Jan ‘15 and managed to close the year with 15% gains after spending several months in negative zone.

MERVAL Argentina (in green) vs. NIFTY

Argentina’s MERVAL index took investors on a roller coaster ride – gaining a huge 100% by end Sep ‘14, then giving up most of the gains by Dec ‘14, only to rally strongly to end the year with 75% gains – handsomely outperforming Nifty.

Canada TSX (in green) vs. NIFTY

After briefly outperforming Nifty in early May ‘14, Canada’s TSX index ended the year with a meagre 5% gain.

S&P 500 (in green) vs. NIFTY

USA’s SPX index had a very good year gaining 12% in a country where interest rate is 0. But it underperformed Nifty almost throughout the year.

Taiwan TSEC (in green) vs. NIFTY

Taiwan is an Asian manufacturing tiger – specially in electronics and computers. But its TSEC index barely gave 10% returns to investors.

Korea KOSPI (in green) vs. NIFTY

Korea’s KOSPI index hugely underperformed the Nifty, just managing to close in positive zone.

Malaysia KLCI (in green) vs. NIFTY

Malaysia’s KLCI index remained in negative zone despite a late rally – underperforming Nifty by a large margin from May ‘14 onwards.

Stock Index Chart Patterns: CAC 40, DAX, RTS – Aug 08, ‘14

CAC 40 Index Chart (France)

The 6 months daily bar chart pattern of CAC 40 is trying to survive in bull territory on hope and a prayer. The following comments appeared in last week’s analysis: “The positive divergences (in technical indicators) can cause an upward bounce. The likely bounce can be a pullback towards the 4275 level, in which case, it would be a selling opportunity.”

On the first 2 days of the week, the index had a mild pullback to the 4250 level. Bears promptly started selling. The index dropped below the 4125 level intra-day but managed to close just above the 4147 level. Does the 4147 level have any technical significance? The answer is: Yes. (Read last week’s post to find out why.)

The 20 day EMA has crossed below the 200 day EMA, which is bearish in the short-term. The 50 day EMA is falling rapidly towards the 200 day EMA; a cross below will technically confirm a bear market. But that confirmation is still awaited.

Daily technical indicators are looking bearish and oversold. MACD and Slow stochastic are well inside their respective oversold zones. RSI is showing some resilience by not entering its oversold zone. Both RSI and Slow stochastic are showing positive divergences by not falling lower with the index.

An upward bounce is possible. The index has corrected almost 11% from its Jun 10 peak (of 4599) to Friday’s intra-day low (of 4109). Some more correction can not be ruled out.

On longer term weekly chart (not shown), the index has closed below its 50 week EMA for the 2nd week in a row, but is trading above its rising 200 week EMA. Weekly technical indicators are in bearish zones. A fall below the 4100 level can test of support from the 200 week EMA (currently at 3936).

DAX Index Chart (Germany)

The following comments in last week’s analysis of the 6 months daily bar chart pattern of DAX may sound prophetic, but was actually the result of an educated guess: “Can the index fall even more? The answer is: Yes.”

The index dropped to an intra-day low of 8903 on Fri. Aug 8 (lower than its Mar 14 low of 8913) but managed to close above the 9000 level. From its Jun ‘14 top of 10051, the index has corrected more than 11% so far.

All three daily technical indicators are inside their oversold zones. An upward bounce is possible at any time. Note that an index (or stock) can remain oversold for long periods – but that typically happens in a bear market. Technically, the index hasn’t entered a bear market yet.

On longer term weekly chart (not shown), the index closed below its 50 week EMA for the 2nd straight week, but is trading well above its rising 200 week EMA. A fall below 9000 can test support from the zone between 8000-8500.

RTS Index Chart (Russia)

Last week’s analysis of the 6 months daily bar chart pattern of RTSI had the following remarks: “Of the three indicators, Slow stochastic is inside its oversold zone. MACD and RSI have not yet entered their respective oversold zones. That means, further downside can’t be ruled out.”

As expected, the index dropped lower to about 1135 but bounced up on the last day of the week to close just below 1175. Though daily technical indicators are inside their oversold zones, all three touched lower bottoms (than their Apr ‘14 lows) while the index touched a higher bottom.

The combined negative divergences will encourage bears to remain active. All attempts at pullbacks are encountering selling pressure.

On longer term weekly chart (not shown), the index is trading below its three weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones, but not looking oversold yet. The down move is likely to continue.

Stock Index Chart Patterns: CAC 40, DAX, RTS – Aug 01, ‘14

CAC 40 Index Chart (France)

The 6 months daily bar chart pattern of CAC 40 tried desperately to hang on to its 200 day EMA during the first 3 days of the week, but faced resistance from its falling 20 day EMA and collapsed below its long-term moving average, and the support level of 4275.

This crash into bear territory should not have come as a big surprise, as the following warning note was sounded last week: “The index faced resistance from its falling 50 day EMA and dropped down to test support from its 200 day EMA. Will the support hold? Seems unlikely from the bearish daily technical indicators.”

So, did the stop-loss at 4275 get triggered? Technically, the answer is: No. The 3% ‘whipsaw’ rule requires a close 3% below 4275, i.e. at about 4147. On Fri. Aug 1, the index touched an intra-day low of 4182 and closed above the 4200 level. Technical nitpicking, you think?

Have a look at the technical indicators. All three are in bearish zones and two – MACD, Slow stochastic – are inside their oversold zones. However, all three touched higher bottoms, while the index dropped lower. The positive divergences can cause an upward bounce.

The likely bounce can be a pullback towards the 4275 level, in which case, it would be a selling opportunity. Only a convincing move above 4415 (top touched on Jul 24) can change the bearish pattern of lower tops and lower bottoms.

On longer term weekly chart (not shown), the index has dropped and closed below its 50 week EMA, but is trading above its rising 200 week EMA. Weekly technical indicators are in bearish zones. A breach of the 4100 level can lead to a test of support from the 200 week EMA (currently at 3934).

DAX Index Chart (Germany)

The 6 months daily bar chart pattern of DAX convincingly breached the support level of 9600, and dropped below its 200 day EMA into the support zone between 9000-9250. The index closed the week just above the 9200 level.

The possibility was mentioned in earlier posts. The following comments were made last week: “Bulls did manage to defend the 9600 level for the week, but how much longer will they be able to do so? All three daily technical indicators are in bearish zones, and moving down. However, they haven’t quite reached their respective oversold zones. That means further down side is likely.”

The stop-loss at 9600 got triggered as the index closed more than 100 points below the 3% ‘whipsaw’ level of 9312. Can the index fall even more? The answer is: Yes. All three technical indicators have dropped inside their oversold zones. But negative divergences are visible as all three have dropped to their earlier low touched in Mar ‘14, whereas the index has touched a higher bottom.

A pullback towards the 200 day EMA is a possibility. Bears may use the opportunity to press sales. On longer term weekly chart (not shown), the index closed below its 50 week EMA for the first time since Apr ‘13, but is trading well above its rising 200 week EMA. A breach of the 9000 level can drop the index to the next support zone between 8000-8500.

RTS Index Chart (Russia)

The 6 months daily bar chart pattern of RTSI fell sharply to the 1200 level, pulled back to the 1245 level where it had closed the previous week, but bear selling pushed it down to the 1200 level once again.

The following remarks were made last week: “All three daily technical indicators are in bearish zones, and moving down. All three EMAs have converged together. A sharp move usually follows.” Since the index was already in a bear market, the sharp move was expected to be downwards.

Of the three indicators, Slow stochastic is inside its oversold zone. MACD and RSI have not yet entered their respective oversold zones. That means, further downside can’t be ruled out.

On longer term weekly chart (not shown), the index is trading below its three weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones, but not looking oversold. A deeper correction is likely.

Subhankar blogs at investmentsfordummieslikeme.blogspot.com

You can reach him at mobugobu@yahoo.com, and follow him on twitter @mobugobu

Stock Index Chart Patterns: CAC 40, DAX, RTS – Jul 25, ‘14

CAC 40 Index Chart (France)

In last week’s analysis of the 6 months daily bar chart pattern of CAC 40, the following comments were made: “Bears are unlikely to release their strong grip on the chart unless the index crosses convincingly above 4375 and its falling 20 day EMA. Bearish technical indicators are suggesting that may be easier said than done.”

Note that the index did manage to cross above the 4375 level and its falling 20 day EMA. But was it a convincing cross? The answer is: No. Why? Two technical reasons. First, the 3% ‘whipsaw’ rule applies for any break out (or break down). In this case, that 3% level (above 4375) is about 4500. The index failed to get anywhere near 4500 (which, incidentally, is another resistance level).

Second, there should be at least 10-14 daily closes above any resistance level for a convincing breach. CAC 40 had only a single day’s close above 4375. The first reason (3% rule) is the preferred one for analysis because it has been time-tested on many thousands of charts.

The index faced resistance from its falling 50 day EMA and dropped down to test support from its 200 day EMA. Will the support hold? Seems unlikely from the bearish daily technical indicators.

MACD has crossed above its signal line, but remains in negative territory. RSI faced resistance from its 50% level and is headed down. Slow stochastic just about crossed above its 50% level into bullish zone, but is already back-tracking.

On longer term weekly chart (not shown), the index is continuing to receive support from its 50 week EMA and is trading above its 50 week and 200 week EMAs in a long-term bull market. However, weekly technical indicators are in bearish zones. The support from the 50 week EMA is in danger of getting breached. Hold with a strict stop-loss at 4275.

DAX Index Chart (Germany)

The following comments appeared in last week’s analysis of the 6 months daily bar chart pattern of DAX: “Bulls are likely to defend the 9600 level strongly, because a drop below it can take the index much lower towards 9000-9250.”

On Mon. Jul 21, the index actually dropped marginally below the 9600 level intra-day, but managed to bounce up and closed at 9612. It then tried to rally past its falling 20 day and 50 day EMAs over the next 3 days, with very little success.

By Fri. Jul 25, bears took control as the index transacted the highest volumes for the week – but much lower than the previous Friday’s volumes. The index once again dropped close to the 9600 level. Bulls did manage to defend the 9600 level for the week, but how much longer will they be able to do so?

All three daily technical indicators are in bearish zones, and moving down. However, they haven’t quite reached their respective oversold zones. That means further down side is likely.

On longer term weekly chart (not shown), the index closed below its 20 week EMA for the first time since the beginning of Apr ‘14, but is trading above its rising 50 week and 200 week EMAs in a long-term bull market. However, weekly technical indicators are falling and look ready to drop into their respective bearish zones. Hold with a strict stop-loss at 9600.

RTS Index Chart (Russia)

Technical indicators were looking a bearish and a bit oversold in last week’s analysis of the 6 months daily bar chart pattern of RTSI. That had led to the following remark: “Any upward bounce from here is likely to face more selling.”

Note that the index dropped and closed below the 1250 level on Mon. Jul 21, but bounced up weakly above the 1275 level on Wed. Jul 23. That was an invitation for bears to resume their selling. By the end of the week, the index closed below the 1250 level once again – losing about 30 points for the week.

All three daily technical indicators are in bearish zones, and moving down. All three EMAs have converged together. A sharp move usually follows. No prizes for guessing in which direction the index is likely to move.

On longer term weekly chart (not shown), the index is trading below its three weekly EMAs in a long-term bear market. Weekly technical indicators are looking bearish. A deeper correction is likely.

Stock Index Chart Patterns: CAC 40, DAX, RTS – Jul 18, ‘14

CAC 40 Index Chart (France)

The following comments were made in last week’s analysis of the 6 months daily bar chart pattern of CAC 40: “Is the correction over? Negative divergences, still visible on the technical indicators, are suggesting otherwise.”

Though the index closed 19 points higher for the week, it has been consolidating within a 100 points zone between 4275-4375 – possibly forming a bearish ‘flag’ pattern in the process. The likely break out from the ‘flag’ is downwards.

Bears are unlikely to release their strong grip on the chart unless the index crosses convincingly above 4375 and its falling 20 day EMA. Bearish technical indicators are suggesting that may be easier said than done.

MACD is inside its oversold zone, moving sideways below its falling signal line. RSI bounced up from the edge of its oversold zone, but remains below its 50% level. Slow stochastic emerged from its oversold zone, but its upward momentum has stalled well below its 50% level.

All three indicators continue to show negative divergences by falling below their respective Feb ‘14 lows, while the index touched a higher low. A fall below 4275 can drop the index towards 4000.

On longer term weekly chart (not shown), the index is receiving support from its 50 week EMA and is trading above its 50 week and 200 week EMAs in a long-term bull market. However, weekly technical indicators have turned bearish. The support from the 50 week EMA may get breached. Hold with a strict stop-loss at 4275.

DAX Index Chart (Germany)

More downside was expected in last week’s analysis of the 6 months daily bar chart pattern of DAX due to bearish technical indicators. Instead, the index used the support from the 9600 level to rally briefly past the 9800 level and its 20 day and 50 day EMAs.

The lower top of 9871 – touched on Wed. Jul 16 – gave an excuse for bears to resume their selling. The index dropped below its 20 day and 50 day EMAs into the support zone between 9600-9800. Will the support hold again?

Volumes on Fri. Jul 18 were the highest in 4 weeks as the index opened with a downward gap and dropped below the 9700 level – indicating strong bear dominance. Bulls fought back and the index closed near its highest level with a 54 points gain for the week.

All three daily technical indicators are in bearish zones. Bulls are likely to defend the 9600 level strongly, because a drop below it can take the index much lower towards 9000-9250.

On longer term weekly chart (not shown), the index is continuing to receive support from its 20 week EMA, and is trading above its 50 week and 200 week EMAs in a long-term bull market. However, weekly technical indicators are falling within bullish zones. Hold with a strict stop-loss at 9600.

RTS Index Chart (Russia)

The 4 months long bull rally from the Mar ‘14 low on the 6 months daily bar chart pattern of RTSI appears to be over. The following bearish possibility was mentioned in last week’s analysis:

“By touching a slightly lower intra-day top of 1420 on Thu. Jul 10, and forming a ‘reversal day’ pattern (higher high, lower close), the possibility of a ‘double top’ reversal pattern has come to the fore. However, the pattern will get confirmed only if the index falls below the 1350 level.”

The index confirmed the ‘double top’ reversal pattern by falling below 1350 and its 50 day and 200 day EMAs – back into bear country. The stop-loss at 1325 got triggered in the process. The 50 day EMA is about to cross below the 200 day EMA and confirm the return to a bear market.

Technical indicators are looking bearish, and a bit oversold. MACD is falling below its signal line and has dropped inside negative zone. RSI has dropped almost to the edge of its oversold zone. Slow stochastic has entered its oversold zone. Any upward bounce from here is likely to face more selling.

On longer term weekly chart (not shown), the index has dropped below its 20 week and 50 week EMAs after finding resistance from its 200 week EMA. Weekly technical indicators are turning bearish. Stay away for now.

Stock Index Chart Patterns: CAC 40, DAX, RTS – Jul 11, ‘14

CAC 40 Index Chart (France)

The 6 months daily bar chart pattern of CAC 40 is undergoing its first serious correction since Mar ‘14. In last week’s analysis, negative divergences visible on the technical indicators and strong volumes on a down day had hinted at continued bear domination.

The selling came sharp and swift. The index hesitated briefly at the expected support level of 4350 before plunging below the 200 day EMA and the 4300 level. By the end of the week, a mild pullback took the index back up to its 200 day EMA.

The 20 day EMA has crossed below the 50 day EMA, and both EMAs are falling – indicating near term weakness. Technical indicators are bearish and looking oversold. MACD has dropped deep into its oversold zone. RSI has bounced up weakly from the edge of its oversold zone. Slow stochastic is trying to move up inside its oversold zone.

Is the correction over? Negative divergences, still visible on the technical indicators, are suggesting otherwise. All three indicators dropped to lower levels than their respective lows back in Feb and Mar ‘14, whereas the index has touched a higher bottom.

On longer term weekly chart (not shown), the index received support from its 50 week EMA and is trading above its 50 week and 200 week EMAs. The long-term bull market is intact. The correction is providing an adding opportunity.

DAX Index Chart (Germany)

The following warning note was sounded in last week’s analysis of the 6 months daily bar chart pattern of DAX, though the index had touched a new lifetime closing high of 10029: “Bearish signals visible at or near a market top should not be ignored. The bearish ‘broadening top’ pattern still exists. By failing to move above its recent intra-day top of 10051, the index is keeping the door open for the formation of a ‘double top’ reversal pattern.”

By falling and closing below the Jun ‘14 low of 9750, the ‘double-top’ pattern, and a downward break from the ‘broadening top’ pattern have been confirmed. That means more downside is likely. The good news is that the stop-loss level of 9600 was not triggered, though the index dropped close to the 9600 level two days in a row.

Technical indicators are looking bearish. MACD is falling below its signal line in negative territory. RSI is below its 50% level. Slow stochastic has dropped inside its oversold zone.

On longer term weekly chart (not shown), the index is testing support from its 20 week EMA, and trading above its 50 week and 200 week EMAs in a long-term bull market. However, it has broken down below a bearish ‘broadening top’ pattern. Negative divergences are also visible on weekly technical indicators.

There is a possibility of the index falling to the zone between 9000-9250. Book some partial profits.

RTS Index Chart (Russia)

There is good news and bad news for bulls that are visible on the 6 months daily bar chart pattern of RTSI. First the good news. The rising 20 day EMA has supported the index well. The 50 day EMA has finally crossed above the 200 day EMA – though the ‘golden cross’ is not a convincing one yet.

Now, the bad news. By touching a slightly lower intra-day top of 1420 on Thu. Jul 10, and forming a ‘reversal day’ pattern (higher high, lower close), the possibility of a ‘double top’ reversal pattern has come to the fore. However, the pattern will get confirmed only if the index falls below the 1350 level.

Daily technical indicators are in bullish zones, but showing signs of weakness. MACD is sliding below its signal line inside overbought zone. Note that the signal line has formed a bearish ‘inverted saucer’ pattern. RSI and Slow stochastic are above their respective 50% levels, but slipping down.

On longer term weekly chart (not shown). the index is trading above its 20 week and 50 week EMAs but below its 200 week EMA in a long-term bear market. Weekly technical indicators are in bullish zones.

Continue accumulation with a stop-loss at 1325. Add more if the index crosses 1425 convincingly.

Stock Index Chart Patterns: CAC 40, DAX, RTS – Jul 04, ‘14

CAC 40 Index Chart (France)

Last week’s analysis of the 6 months daily bar chart pattern of CAC 40 had the following comments: “The index dropped below its 20 day and 50 day EMAs into the support zone between 4420-4500. Despite an intra-day breach of 4420 on Thu. Jun 26, the support zone should prevent a deeper fall.”

On Mon. Jun 30, the index dropped to an intra-day low 4407 but closed the day just above the 4420 level. A brief rally took the index to an intra-day high of 4491 on Thu. Jul 3, but the resistance from the falling 20 day EMA proved too strong. The index closed the week at 4469 – below its 20 day and 50 day EMAs, but with a gain of 32 points.

Technically, the index spent the entire week within the support zone between 4420-4500 despite another intra-day breach of the 4420 level. But failure to rise above 4500 is not a bullish sign. Bulls may feel happy that the support zone prevented a deeper fall.

Daily technical indicators are suggesting that the happiness may be short-lived. All three indicators have recovered from their lows, but remain in bearish zones. All three are showing negative divergences by touching lower lows (than the ones touched in Apr ‘14) while the index touched a higher bottom.

During the week, volumes (not shown on chart) were the highest on Wed. Jul 2 – which was a down day. Bears are not ready yet to release their grip on the chart. In case 4420 gets breached convincingly on the down side, expect stronger support at 4350.

On longer term weekly chart (not shown), the index continues to receive support from its 20 week EMA. The bull market correction is providing an adding opportunity.

DAX Index Chart (Germany)

The 6 months daily bar chart pattern of DAX bounced up strongly after receiving support from its rising 50 day EMA, and cruised past the psychological 10000 level. On Thu. Jul 3, the index touched a slightly lower intra-day top of 10032, but closed at a lifetime high of 10029. A small correction on the last day of the week still kept the index above the 10000 level.

In last week’s analysis, technical indicators were looking bearish and a continuation of the correction was expected. Instead, the index defied gravity and closed at a new high. Just goes to show the fallibility of technical analysis (which is not a science despite the name).

Bearish signals visible at or near a market top should not be ignored. The bearish ‘broadening top’ pattern still exists. By failing to move above its recent intra-day top of 10051, the index is keeping the door open for the formation of a ‘double top’ reversal pattern.

Daily technical indicators have turned bullish. MACD is about to cross above its falling signal line in positive zone. RSI has moved above its 50% level. Slow stochastic has almost reached the edge of its overbought zone.

On longer term weekly chart (not shown), the index is trading above all three weekly EMAs in a long-term bull market. However, it is consolidating in a range within 9750-10050 and forming a bearish ‘broadening top’ pattern in the process.

No need to sell yet. Stay invested with a stop-loss at 9600. Book part profits if you are a conservative investor.

RTS Index Chart (Russia)

Last week’s analysis of the 6 months daily bar chart pattern of RTSI had the following comments: “Technical indicators are correcting overbought conditions, but remain in bullish zones. However, all three continue to show negative divergences by failing to touch new highs with the index. A correction may be just around the corner.”

A correction has started, though the 20 day EMA has prevented a steep fall so far. The 50 day EMA is ready to cross above the 200 day EMA – the ‘golden cross’ technically confirms a return to a bull market. However, it needs to be a convincing cross – for which the index needs to hold its current level or move higher.

That may be easier said than done. Daily technical indicators are still in bullish zones. But all three are in down trends and may slip into bearish zones soon.

On longer term weekly chart (not shown). the index is trading above its 20 week and 50 week EMAs but below its 200 week EMA in a long-term bear market.

Accumulate with a stop-loss at 1300. Add more if the index crosses 1425 convincingly.

Stock Index Chart Patterns: CAC 40, DAX, RTS – Jun 27, ‘14

CAC 40 Index Chart (France)

The following comments were made in last week’s analysis of the 6 months daily bar chart pattern of CAC 40: “The index rose to touch a lower top of 4582 on Thu. Jun 19, and dropped to a marginally lower close for the week. The lower top leaves the door open for a continuation of the corrective move next week.”

The index dropped below its 20 day and 50 day EMAs into the support zone between 4420-4500. Despite an intra-day breach of 4420 on Thu. Jun 26, the support zone should prevent a deeper fall.

Technical indicators are looking bearish, and a bit oversold. MACD has entered its negative zone, and is falling below its signal line. RSI is just above the edge of its oversold zone, but its fall has stalled. Slow stochastic has entered its oversold zone.

In case bear selling overwhelms the bulls, expect much stronger support from the 4350 level. The index is trading well above its rising 200 day EMA. The long-term bull market is under no threat. The correction is providing an opportunity to add.

On longer term weekly chart (not shown), the index is receiving support from its 20 week EMA.

DAX Index Chart (Germany)

In last week’s analysis of the 6 months daily bar chart pattern of DAX, there were some bearish signals: the index formed a ‘shooting star’ candlestick pattern supported by highest volumes in 9 months, and also formed a ‘broadening top’ pattern.

The combination was a recipe for reversal of the up trend. So far, the index has corrected only 2% from its top of 10051, and has received good support from its 50 day EMA and the support zone between 9600–9800 (mentioned two weeks back). The long-term bull market is under no threat as yet.

Technical indicators are looking bearish. MACD is positive, but falling below its signal line. RSI has dropped below its 50% level. Slow stochastic has moved down to the edge of its oversold zone. Expect some more correction or consolidation.

The correction is providing an adding opportunity. But maintain a stop-loss at 9300.

RTS Index Chart (Russia)

The 6 months daily bar chart pattern of RTSI continued its rally, rising to touch a new high just short of 1425. The index could not sustain above the 1400 level for long, but closed the week with a gain of 21 points.

The rising 50 day EMA is on the verge of crossing above the 200 day EMA. The ‘golden cross’ will technically confirm a return to a bull market.

Technical indicators are correcting overbought conditions, but remain in bullish zones. However, all three continue to show negative divergences by failing to touch new highs with the index. A correction may be just around the corner.

On longer term weekly chart (not shown). the index is trading above its 20 week and 50 week EMAs but facing resistance from its 200 week EMA. Technically, the long-term bear market isn’t over yet.

Only a strong move above the 200 week EMA and the Oct ‘13 top of 1525 will break the bearish pattern of lower tops and lower bottoms. Looks like bulls have their work cut out.

Stock Index Chart Patterns: CAC 40, DAX, RTS – Jun 20, ‘14

CAC 40 Index Chart (France)

The 6 months daily bar chart pattern of CAC 40 dropped below its 20 day EMA and closed at 4510 on Mon. Jun 16. The next day, the index touched an intra-day low of 4508 – just above the support zone between 4420-4500 mentioned in last week’s post – but bounced up to close above its 20 day EMA.

The index rose to touch a lower top of 4582 on Thu. Jun 19, and dropped to a marginally lower close for the week. The lower top leaves the door open for a continuation of the corrective move next week.

Technical indicators are in bullish zones, but looking weak. MACD is sliding below its signal line in positive territory. RSI bounced up from its 50% level, but is again falling towards it. Slow stochastic bounced up sharply after dropping below its 50% level, but its upward momentum is stalling.

The index is in a long-term bull market. Corrections provide adding opportunities.

DAX Index Chart (Germany)

The 6 months daily bar chart pattern of DAX has some good news for the bulls and some bad news. First, the good news:

Technical indicators in last week’s chart had suggested a continuation of the correction. Instead, the index took support from its 20 day EMA, and formed a higher bottom and higher top pattern for the week. The index touched a new intra-day high of 10051 on Fri. Jun 20, but closed at the lowest point of the day. However, it gained back its previous week’s loss.

Now, the bad news. The index formed a ‘shooting star’ pattern (in candlestick parlance) supported by highest volumes in 9 months (not shown on chart). The combination of the two can lead to a possible reversal of the up trend. Another pattern visible is a ‘broadening top’ (higher tops, lower bottoms), which has bearish implications.

Technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index. One of the lessons learnt the hard way (i.e. by losing money) is never to short a bull market. However, partial profit booking near a new high may be a prudent move.

RTS Index Chart (Russia)

The 6 months daily bar chart pattern of RTSI traded in bull territory throughout the week (i.e. above its gently rising 200 day EMA), touching an intra-day high of about 1390 on Thu. Jun 19, but closed 16 points lower for the week.

The 20 day EMA has crossed above the 200 day EMA, indicating short-term bullishness. However, though rising, the 50 day EMA is still below the 200 day EMA. So, the technical confirmation of a bull market is still awaited.

Technical indicators are in bullish zones, but showing negative divergences by touching lower tops. The index is likely to undergo some correction or consolidation.

Stock Index Chart Patterns: CAC 40, DAX, RTS – Jun 13, ‘14

CAC 40 Index Chart (France)

The 6 months daily bar chart pattern of CAC 40 rose to touch a new high just short of the 4600 level on Jun 10, but formed a ‘doji’ pattern (in candlestick parlance) that indicates indecision among bulls and bears.

The index corrected during the last three days of the week, dropping below its 20 day EMA intra-day on Jun 13, but recovering to close above all three EMAs. However, the index lost about 38 points (0.8%) on a weekly basis.

Can the index correct some more? It appears so. Technical indicators are in bullish zones, but showing downward momentum. MACD has moved down to touch its signal line in positive zone. RSI faced resistance from the edge of its overbought zone, and is falling towards its 50% level. Slow stochastic formed a ‘double-top’ reversal pattern inside its overbought zone, and has dropped sharply towards its 50% level.

The zone between 4420-4500 has several previous index tops, and should act as a support zone. The index is in a long-term bull market, so the dip can be used to add. But don’t forget to maintain a stop-loss.

DAX Index Chart (Germany)

The 6 months daily bar chart pattern of DAX touched a new high of 10034 on Jun 10, but could not sustain itself in the rarefied atmosphere above the 10000 level. Three days of correction took the index below its 20 day EMA on intra-day basis. However, the weekly close was above the 9900 level – about 74 points (0.7%) lower than the previous week.

Technical indicators are suggesting that the correction may not be over. MACD has crossed below its signal line in positive territory. RSI is falling towards its 50% level. Slow stochastic formed a ‘double-top’ reversal pattern inside its overbought zone, and has dropped sharply towards its 50% level. Both MACD and Slow stochastic are showing negative divergences by failing to touch new highs with the index.

The zone between 9600-9800 has several previous index tops, and should act as a support zone. The index is in a long-term bull market, which means dips provide adding opportunities.

RTS Index Chart (Russia)

The 6 months daily bar chart pattern of RTSI formed a ‘double-bottom’ reversal pattern during March and April ‘14 that seems to have ended the bear market. The subsequent rally has taken the index above its three EMAs into bullish territory.

However, it may be too early for the bulls to start celebrations. The 50 day EMA is well below the 200 day EMA. Only a ‘golden cross’ of the 50 day EMA above the 200 day EMA will technically confirm a bull market.

There are other concerns as well. The index has touched a 4 months high, but all three technical indicators are looking overbought and showing negative divergences by failing to touch new highs with the index. A correction is likely.

Comparative charts of world stock indices at 52 week highs

In yesterday’s post on the Nifty chart, the concluding comments were: “Expect some more correction, but remember that many global stock indices are at or near life-time or 52 week highs. That is a sign of a global bull market.”

Given below are the 1 yr closing charts of 10 global stock indices (in blue) that are at or near their 52 week highs. The 1 yr closing chart of Nifty (in green) has been superimposed for comparison purposes.

Notable exceptions are the three BRIC countries – Brazil, Russia, China – whose stock indices are well below their 52 week highs. But wait a minute. Isn’t China’s economy showing the strongest growth? Much stronger than India’s? And isn’t the economic growth in USA one of the weakest?

So, how come Nifty is performing better than the Shanghai Composite, and S&P 500 is outperforming Nifty? Just goes to show that economic growth and stock market performance don’t go hand-in-hand.

Australia All Ordinaries vs. NIFTY (in green)

The Australian index has outperformed Nifty after falling behind till Feb ‘13.

Austria ATX vs. NIFTY (in green)

 

The Austrian index has outperformed Nifty throughout the past 12 months.

France CAC40 vs. NIFTY (in green)

France’s economy is still struggling to grow, but its stock index has beaten Nifty hands down.

DAX Germany vs. NIFTY (in green)

Germany’s stock index has outperformed Nifty since Dec ‘12.

MERVAL Argentina vs. NIFTY (in green)

Argentina’s stock index is one of the best performers over the past 12 months – rising almost 150%.

Canada TSX vs. NIFTY (in green)

Canada’s stock index has matched Nifty’s performance but with a lot less volatility.

S&P 500 vs. NIFTY (in green)

The stock index of USA has trounced Nifty handsomely despite sluggish economic growth.

Taiwan TSEC vs. NIFTY (in green)

Taiwan’s TSEC has outperformed Nifty from Feb ‘13 onwards.

Korea KOSPI vs. NIFTY (in green)

KOSPI is the only index among the 10 that Nifty has managed to leave behind.

Malaysia KLCI vs. NIFTY (in green)

Malaysia’s KLCI index lagged behind Nifty till Mar ‘13, but has managed to make up the deficit.

Global indices vs. Sensex

Many investors, including fund houses, have been taken by surprise by the strong surge in the Indian stock market during the past year. FIIs have shown their faith by remaining net buyers throughout. The Sensex is trading very close to its 52 week high touched in Jan ‘13, and is a short distance away from its all-time high.

The bullishness is not limited to the Sensex alone. Many global indices are looking just as bullish as the Sensex. Some are at life-time highs. Here is a look at the one year charts of four global indices (in blue) compared with the Sensex (in green).

Jakarta Composite vs. Sensex

Jakarta Composite and Sensex have gained an almost identical amount during the past 12 months. Note that Jakarta faced the last major correction back in May ‘12, while Sensex had a good correction during Feb-Mar ‘13. Sensex should resume its outperformance.

Germany DAX vs. Sensex

After moving neck-and-neck till Feb ‘13, Germany’s DAX index has strongly outperformed Sensex during the past 2 months. DAX is currently at a life-time high, but RSI is looking extremely overbought.

Dow Jones vs. Sensex

Though Dow Jones index is near a life-time high, it has underperformed the Sensex during the past year. RSI is overbought, and showing negative divergence by failing to touch a new high.

Argentina MERVAL vs. Sensex

Argentina’s MERVAL index underperformed the Sensex till Nov ‘12, but has surged ahead since then. The Sensex is near a life-time high, but RSI is looking overbought, and a correction may be on the way.