FIIs were net buyers of equity on Mon., Wed. and Fri. (Dec 9, 11 and 13) but were net sellers on the other two trading days. Their total net buying was worth Rs 1.3 Billion. DIIs were net buyers on all five trading days. Their total net buying was worth Rs 18.5 Billion - as per provisional figures.
India's CPI-based retail inflation rose to a 40 months high of 5.54% in Nov '19 from 4.62% in Oct '19 due to higher food prices. CPI-based inflation was 2.33% in Nov '18. The combination of falling GDP growth and rising inflation and unemployment may lead to stagflation.
For the second straight month, India's Index of Industrial Production (IIP) contracted. It was -3.8% YoY in Oct '19 - a slight improvement over -4.3% YoY in Sep '19. For the Apr-Oct '19 period, IIP was 0.5% against 5.7% during Apr-Oct '18.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex formed a 'reversal day' bar (lower low, higher close) on Wed. Dec 11 that triggered a sharp bounce above its 20 day EMA by Fri. Dec 13. FIIs turned buyers on expectation of a US-China trade deal.
The index is trading above its three daily EMAs in a bull market, and gained more than 560 points (1.4%) on a weekly closing basis.
Daily technical indicators are looking neutral to bullish. MACD is moving up towards its falling signal line in bullish zone. ROC has crossed above its 10 day MA in neutral zone. RSI and Slow stochastic are at their respective 50% levels. The index seems ready to rise to a new high.
The bull market may be entering a new upward phase after six weeks of sideways consolidation. Small investors would do well to not get sucked into it. There are very few signs of bottoming out in the economy, and most of the large-cap stocks leading the index rally are looking overvalued.
The government appears out of its depth in handling the country's self-inflicted economic woes. The hastily pushed through CAB bill - probably in an effort to manage headlines and divert attention - is having international repercussions as it has generated widespread internal protests.
Image building, vote catching, fear mongering and policy flip-flops have become the hallmarks of the current dispensation. This has generated a feeling of uncertainty among citizens, which is the exact opposite of the feel-good factor that is required to stimulate consumption and investment. For small investors, capital protection is the need of the hour.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty failed to close above its previous (Jun 7) top of 12103 for the third week in a row. The index is trading well above its three rising EMAs in a long-term bull market, and gained about 165 points (1.4%) on a weekly closing basis. It should be just a matter of time before the index rises higher.
However, the fact that the index is struggling to close above 12103 may encourage bears in the off chance that Nifty may be forming a 'double top' reversal pattern.
Such a pattern gets confirmed if volumes during formation of the second top is lower (not the case here) and if the index falls below its low of 10637 (touched on Aug 23). Looks like bulls need not worry too much about that.
Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC has crossed above its 10 week MA to re-enter its overbought zone. RSI has bounced up from the edge of its overbought zone. Slow stochastic is moving sideways inside its overbought zone. Bulls appear to be regaining control after a period of consolidation.
Nifty's TTM P/E has moved up to 28.17 - its highest level for the month and well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling inside its oversold zone, hinting at some more near-term index upside.
Bottomline? Sensex and Nifty charts have been consolidating after touching lifetime highs. Caution is advised due to rising CPI inflation, poor GDP and IIP numbers and a crisis of confidence among consumers. Stay invested, but avoid buying near lifetime high index levels.
FIIs were net sellers of equity on Mon. and Tue. (Nov 18 and 19), but were net buyers during Wed. through Fri. (Nov 20-22). Their total net buying was worth Rs 47.1 Billion. DIIs were net buyers of equity on Mon. through Wed., but were net sellers on the last two days. Their total net buying was worth Rs 3.3 Billion.
India's urban unemployment rate during Jan-Mar '19 dropped to 9.3% from 9.9% during Oct-Dec '18. Unemployment among 15-29 year olds was 22.5% during Jan-Mar '19 against 23.7% during Oct-Dec '18.
According to a report by CEAMA, India's appliances and consumer electronics market size is expected to nearly double to Rs 1.48 Trillion by FY 25 from Rs 764 Billion in FY 19.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex has been consolidating sideways within a 'rectangle' pattern for the past three weeks. The entire consolidation has taken place above the three rising EMAs in a bull market. So, the expected index breakout from the 'rectangle' is upwards.
However, a 'rectangle' is an unreliable pattern that can sometimes act as a 'reversal' pattern. A downward breakout from the pattern is a possibility that should not be ignored. The zone between 39450 and 39250 can act as a support on the downside.
Daily technical indicators are showing downward momentum. MACD crossed below its rising signal line and has slipped down from its overbought zone. ROC is below its falling 10 day MA and has dropped into bearish zone. RSI and Slow stochastic are falling towards their respective 50% levels.
Note that all four indicators are showing negative divergences by moving down while the the index is consolidating sideways and three EMAs are moving up. That can trigger some correction or more sideways index consolidation.
Of late, market experts have been talking about overvalued quality stocks and pockets of value among mid-cap and small-cap stocks. Small investors would do well to ignore such talk. During economic slowdowns, smaller companies and their stocks tend to underperform.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty gained about 19 points and closed well above its three rising EMAs in a long-term bull market. However, the index is struggling to close above the psychological 12000 level, and may have formed a small 'double top' reversal pattern.
Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC has started to slide down inside its overbought zone. RSI is moving sideways just below the edge of its overbought zone. Slow stochastic is moving sideways inside its overbought zones. More index consolidation or some correction is possible.
Nifty's TTM P/E has moved up to 27.77 - which is well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at more near-term index consolidation.
Bottomline? Sensex and Nifty charts are consolidating sideways above their rising daily and weekly EMAs in long-term bull markets. Both indices are close to their lifetime highs, which is not a good time to buy.
FIIs were net sellers of equity on all three trading days this week. Their total net selling was worth Rs 25.2 Billion. DIIs were net buyers of equity on all three trading days. Their total net buying was worth Rs 11.7 Billion, as per provisional figures.
India's WPI-based inflation was 1.08% in Aug '19 - the same as in Jul '19 but much lower than 4.62% in Aug '18. Rise in inflation of food items was balanced by deflation in fuel and power.
The Finance Ministry is considering a fourth 'booster' dose to revive a sliding economy, after the first three 'booster' doses failed to generate any significant revival in 'animal spirits'.
For the past seven weeks, the daily bar chart pattern of Nifty has been consolidating sideways with a slight downward bias, touching progressively lower tops. The 'death cross' (marked by grey oval) of the 50 day EMA below the 200 day EMA at the beginning of the month had technically confirmed a bear market.
Bulls are fighting hard, but the resistance zone between 11100 and 11200 has proved to be a tough hurdle. The Aug 23 low of 10637 is in danger of being tested, and breached.
The index had bounced up after testing support from the lower Bollinger Band at the beginning of the month. But the counter-trend rally lost steam after crossing above the middle band (20 day SMA - marked by green dotted line).
Daily technical indicators are in bearish zones. MACD is seeking support from its rising signal line. RSI is below its 50% level. Slow stochastic formed a 'double top' reversal pattern at the edge of its overbought zone, and has dropped sharply below its 50% level.
Nifty's TTM P/E has slipped down to 26.66, but remains inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating near the edge of its oversold zone, hinting at some near-term index consolidation.
Three 'booster packages' from the Finance Minister have come and gone without making a dent on the bearish sentiment of FIIs. Bulls are hoping for a miracle from our popular leader. But he seems more interested in fiddling around with photo-ops while the economy is sinking.
Q2 (Sep '19) corporate earnings may be worse than Q1 (Jun '19) numbers. The upcoming festive season sales may prevent a total washout. Small investors should be extremely wary about bottom fishing.
Gold chart pattern
The following comments appeared in the previous post on the daily bar chart pattern of Gold: "...the rally has been a bit too steep. Some profit booking is likely to emerge soon."
After a sharp upward breakout with good volume support above a 'Cup and Handle' pattern, gold's price twice tested the 1440 level - forming a small 'double top' reversal pattern.
A pullback towards the rising 20 day EMA and some sideways consolidation followed. Gold's price is trading above its three rising EMAs in a bull market.
Daily technical indicators are correcting overbought conditions. MACD has crossed below its signal line inside its overbought zone. RSI has fallen from its overbought zone. Slow stochastic formed a 'double top' pattern before dropping from its overbought zone.
The US Dollar index dropped to a low of 95.36 on Jun 25, triggering the sharp rally in Gold's price. Since then, the Dollar Index has recovered smartly past 97 - keeping a lid on further upside in price.
On longer term weekly chart (not shown), gold’s price closed well above its three rising weekly EMAs in long-term bull territory. Weekly technical indicators are beginning to correct overbought conditions. Some more price consolidation or correction can follow.
Silver chart pattern
The following comments appeared in the previous post on the daily bar chart pattern of Silver: "Slow stochastic is consolidating at the edge of its overbought zone. Some price consolidation/correction can be expected."
Silver's price consolidated sideways above its 200 day EMA before forming a small 'double top' reversal pattern and corrected down to its 50 day EMA.
Daily technical indicators are turning bearish. MACD formed a small bearish 'rounding top' pattern and crossed below its signal line. RSI has dropped to seek support from its 50% level. Slow stochastic has slipped below its 50% level. Some more price correction or consolidation is likely.
On longer term weekly chart (not shown), silver's price closed at its 20 week EMA, but below its 50 week EMA and well below its sliding 200 week EMA in a long-term bear market. Weekly technical indicators are looking bullish to neutral, but not showing any upward momentum.
S&P 500 index chart pattern
The following comment appeared in last week's post on the daily bar chart pattern of S&P 500: "Some more consolidation is possible before the index attempts to scale a new high."
The sideways consolidation continued on Mon. Jun 17. Next day, the index formed an upward 'gap' that triggered a dash towards the previous (May 1) top of 2954. On Thu. Jun 20, the index touched a new high of 2958, but closed exactly at its previous top of 2954.
On Fri. Jun 21, the index touched another new high of 2964 with a volume surge, but closed lower at 2950 - forming a small 'reversal day' bar (higher high, lower close). A 'reversal day' bar at a market top can trigger a correction.
Failure to close convincingly above its previous top leaves the door open for the formation of a 'double top' reversal pattern - which will get confirmed only if the index falls below 2729 (the low touched on Jun 3).
Daily technical indicators are in bullish zones, but only MACD is showing some upward momentum. MACD is rising above its signal line in bullish zone. RSI has slipped down after facing resistance from the edge of its overbought zone. Slow stochastic is moving sideways well inside its overbought zone.
All three indicators are showing negative divergences by failing to touch new highs with the index. Expect bears to put up a fight to defend the 2954 level. But it might be a 'fight for a cause long ago forgotten'. The index closed 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. Weekly technical indicators are moving up in bullish zones, but showing negative divergences by failing to touch new highs with the index.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 bounced up after receiving good support from its 20 day EMA, and rose to touch the week's high of 7469 on Tue. Jun 18. Bears got into the act, preventing the index from making further upward progress.
The volume spike on Fri. Jun 21 may be the sign of a selling climax. The index managed to close above the 7400 level and its three EMAs in bull territory, with a weekly gain of 0.8%.
Daily technical indicators are in bullish zones but only MACD is showing upward momentum. MACD is rising above its signal line in bullish zone. RSI is moving sideways above its 50% level. Stochastic has dropped to the edge of its overbought zone after re-entering it.
A convincing close above the previous (Apr 23) top of 7529 is required for bulls to regain control of the chart, and technically confirm completion of a bullish 'cup and handle' pattern (clearly visible on the 50 day EMA).
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory for the third straight week. Weekly technical indicators are turning bullish. MACD is about to cross above its signal line in bullish zone. RSI and Stochastic are rising above their respective 50% levels. Some more upside seems likely.
Gold chart pattern
The following comment appeared in the previous post on the daily bar chart pattern of Gold: "The past 2 months' trading has formed the 'handle', which itself is looking like a 'falling wedge' from which the likely breakout is upwards."
Note that gold's price twice dropped below its 200 day EMA into bear territory, but formed a small 'double bottom' reversal pattern. That triggered a technical bounce that has broken out above the 'falling wedge' (which is the 'handle' of a 'cup and handle') pattern.
A strong volume surge accompanied the upward break out - validating it technically. Gold's price managed to close above the 1300 level, and well above its three EMAs in bull territory after a month.
Daily technical indicators are looking bullish. MACD is rising above its signal line in bearish zone. RSI is climbing above its 50% level. Slow stochastic has entered its overbought zone, and can trigger a pullback towards the top of the 'wedge'.
After touching a high of 98.10 on Apr 26 - its highest level in 2 years - the US Dollar index dropped to a low 96.80 on May 13. Gold's price usually moves in the opposite direction to the Dollar index.
On longer term weekly chart (not shown), gold’s price bounced up after receiving support from its 200 week EMA, and closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are giving conflicting signals. MACD is moving sideways below its falling signal line in bullish zone. RSI is rising above its 50% level. Slow stochastic has emerged from its oversold zone, and can trigger a rally.
Silver chart pattern
The daily bar chart pattern of Silver had formed a 'double top' reversal pattern back in Feb '19, and has been in a down trend (marked by purple trend line) since then.
A couple of recent attempts to break out above the trend line and the falling 20 day EMA have come to nought. Silver's price is trading below its three falling EMAs in a bear market.
A silver lining for bulls is the formation of a small 'double bottom' reversal pattern near the 14.60 level. Whether the support at 14.60 holds or not remains to be seen.
Daily technical indicators are in bearish zones, and not showing any upward momentum. MACD has merged with its signal line. RSI is moving sideways below its 50% level. Slow stochastic has dropped below its 50% level after briefly moving above it.
On longer term weekly chart (not shown), silver's price is trading below its three falling weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones and showing downward momentum - suggesting some more correction.
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: "For the past seven weeks, the index is trading within a 'rising wedge' pattern, from which a downward breakout is likely."
There was no breakout in the week gone by, as the index kept rising along the upper edge of the 'wedge'. The rally stopped just a point short of the lifetime high of 2941 touched on Sep 21 '18.
Some hesitation and profit booking can be expected near a previous top. Whether that would lead to a breach of the twin support from the rising 20 day EMA and the lower edge of the 'wedge' remains to be seen.
Can the index form a 'double top' reversal pattern? Seems unlikely, but the possibility can't be ruled out.
Daily technical indicators are looking bullish and overbought, but not showing much upward momentum. MACD is moving sideways after merging with its signal line. RSI has re-entered its overbought zone after a brief slip below it. Slow stochastic has bounced up from the edge of its overbought zone.
All three EMAs are rising and the index is trading above them in a bull market. However, negative divergences visible on all three indicators - which failed to touch new highs with the index - can trigger a correction.
On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market. Weekly MACD is rising above its signal line in overbought zone. RSI is rising above its 50% level. Slow stochastic is well inside its overbought zone.
FTSE 100 index chart pattern
After a long Easter break, the daily bar chart pattern of FTSE 100 touched a high of 7529 on Tue. Apr 23, but failed to sustain above the 7500 level for the rest of the week.
Profit booking dropped the index towards its 20 day EMA, where it has received some support. Despite the correction, the index continues to trade well above its 200 day EMA in a bull market.
Daily technical indicators are looking bearish. MACD has crossed below its signal line in bullish zone. RSI is falling towards its 50% level. Stochastic has dropped to the edge of its oversold zone, and can trigger a technical bounce.
The index has formed a large bullish 'rounding bottom' pattern, which is more clearly visible on the 50 day EMA. Much higher levels (above 8000) are likely in the medium term.
On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in long-term bull territory. Weekly technical indicators are in bullish zones. MACD is rising above its signal line. RSI is above its 50% level but showing slight downward momentum. Stochastic is correcting inside its overbought zone.
FIIs were net buyers of equity on Mon., Tue. and Fri. (Apr 1, 2 and 5) but were net sellers on Wed. and Thu. (Apr 3 and 4). Their total net buying was worth Rs 9.7 Billion during the week. DIIs were net buyers of equity on Thu. but net sellers on the other four days. Their total net selling was worth Rs 6.7 Billion, as per provisional figures.
Nikkei India's Services PMI slipped to 52.0 in Mar '19 from 52.5 in Feb '19. It was the slowest growth (a number above 50 indicates growth) since Sep '18. The Composite PMI (Manufacturing + Services) fell to 52.7 in Mar '19 from 53.8 in Feb '19.
After cutting repo and reverse repo rates by 25 bps (0.25%) - acknowledging a slowdown in India's growth momentum - RBI has lowered the GDP growth forecast for FY 2019-20 to 7.2% from the earlier estimate of 7.4%.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex rose to touch a new lifetime high of 39270 on Wed. Apr 3 but formed a 'reversal day' bar (higher high, lower close) that often terminates an intermediate up trend.
After a pullback to the top of the large upward-sloping channel on Wed. Apr 3, the index dropped inside the trading channel on follow-up profit booking by FIIs on Thu. Apr 4.
The index moved up to the upper edge of the channel on Fri. Apr 5 as FIIs turned net buyers once again, and is trading well above its three rising EMAs in a bull market.
Is the index forming a large 'double top' reversal pattern? It is a bit too early to call. There are two technical 'rules' for confirming a 'double top': (1) lower volumes during formation of the second top; (2) an index fall below the 'valley' point (33292 touched on Oct 26 '18) between the two tops.
Neither of those two 'rules' have been followed so far. A more likely near-term possibility is some profit booking and an index fall towards the 125 points upward 'gap' formed on Mar 12 '19.
Daily technical indicators have corrected overbought conditions. MACD is about to cross below its rising signal line in bullish zone. ROC is facing resistance from its falling 10 day MA in bullish zone. RSI and Slow stochastic have fallen down from their respective overbought zones.
The stock market has 'memory' - because traders remember the level of the previous top from where a sharp correction had started. Psychologically, they tend to book profits when the index is at or near a previous top.
Therefore, some more correction or consolidation can be expected - specially with results season coinciding with election season. Small investors would do well not to dive into the market now. A SIP approach may work better.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty closed higher for the 7th week in a row, as FIIs remained net buyers. The index also managed to close above the upward-sloping trading channel for the 2nd straight week.
The breakout above the channel still isn't a convincing one, though the index did touch a new high (by 0.8 points). Follow-up buying from FIIs was weak. Nifty formed a long-legged 'doji' candlestick, which is a sign of indecision among bulls and bears.
An observant analyst posted on twitter that the previous (Aug '18) top was preceded by 8 weeks of a corrective move followed by 23 weeks of rally. The Apr '19 top was also preceded by 8 weeks of sharp correction followed by 23 weeks of rally.
It is one of those interesting coincidences that sometimes happen on price charts, but doesn't have any particular technical significance. The index is trading above its weekly EMAs in a bull market. A big correction may or may not occur - but if it does, it should be used as a buying opportunity.
Weekly technical indicators are looking bullish and overbought. MACD is above its signal line and rising towards its overbought zone. ROC is above its 10 week MA, and is well inside its overbought zone. RSI is moving sideways above the edge of its overbought zone. Slow stochastic well inside its overbought zone, and is also moving sideways.
Nifty's TTM P/E has moved up to 29.12, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is in neutral zone after rising sharply from its overbought zone. Some index consolidation or correction can be expected.
Bottomline? Sensex and Nifty charts are hovering near the upper edges of their respective upward-sloping trading channels, and may face some consolidation or correction before moving up further. Avail dips to add.
Gold chart pattern
The daily bar chart pattern of Gold received good support from the middle Bollinger Band (20 day SMA, marked by green dotted line) and rose quickly to touch a high of 1349.80 on Feb 20.
By closing above the upper Bollinger Band, the door was left wide open for bears. Gold's price corrected sharply below the lower Bollinger Band and closed below its 50 day EMA after more than three months.
Daily technical indicators are showing downward momentum after correcting overbought conditions. MACD is falling below its signal line in bullish zone. RSI has dropped below its 50% level. Slow stochastic has entered its oversold zone, and can trigger a pullback towards the 50 day EMA.
After a sharp fall below 96 on Feb 26, the US Dollar index is rising towards 97. That seems to have dampened bullish enthusiasm. The strong rally from the Nov '18 low has ended.
On longer term weekly chart (not shown), gold’s price dropped to seek support from its 20 week EMA, and closed above its three weekly EMAs in long-term bull territory for the tenth week in a row. The 'golden cross' of the 50 week EMA above the 200 week EMA has technically confirmed a return to a long-term bull market. Weekly technical indicators have corrected overbought conditions but are showing downward momentum in bullish zones.
Silver chart pattern
The daily bar chart pattern of Silver bounced up after receiving good support from its 50 day EMA and rose to test its previous (Jan 31) top of 16.29, but failed to close above it.
Silver's price pierced the upper Bollinger Band and formed a 'double top' reversal pattern. A sharp correction below the lower Bollinger Band and the 200 day EMA followed.
Daily technical indicators are looking bearish. MACD is falling below its signal line and has entered bearish zone. RSI is falling towards its oversold zone. Slow stochastic has entered its oversold zone, and can trigger a pullback towards the 200 day EMA.
On longer term weekly chart (not shown), silver's price closed below its three weekly EMAs in a long-term bear market. Weekly technical indicators are showing downward momentum. MACD and Slow stochastic are in bullish zones. RSI has fallen below its 50% level.
WTI Crude Oil chart
The daily bar chart pattern of WTI Crude Oil managed to move above its 50 day EMA, but retreated after facing strong resistance from the 'support/resistance zone' between 53 and 55.
Oil's price bounced up a bit after getting support from its 20 day EMA, but is trading well below its falling 200 day EMA in a bear market.
Daily technical indicators are turning bearish. MACD is above its signal line in bullish zone, but may be forming a 'rounding top' reversal pattern. RSI is seeking support from its 50% level. Slow stochastic has corrected down from its overbought zone.
US sanctions may curb oil exports from Venezuela, but with China's economy slowing down and ample global supply, a sustained rally in oil's price is unlikely.
On longer term weekly chart (not shown), oil's price closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are in bearish zones and not showing much upward momentum. The 50 week EMA has just crossed below the 200 week EMA - the 'death cross' technically confirming a long-term bear market.
Brent Crude Oil chart
The daily bar chart pattern of Brent Crude Oil touched an intra-day high of 63.15 on Mon. Jan 21, but could not sustain above the 'support/resistance zone' between 61 and 63.
Oil's price has since closed below its 20 day EMA - and well below its sliding 200 day EMA in a bear market.
Daily technical indicators are looking bearish. MACD is moving sideways above its signal line in bullish zone. RSI has slipped below its 50% level. Slow stochastic has fallen from its overbought zone after forming a 'double top' reversal pattern.
Some more correction and/or consolidation is possible.
On longer term weekly chart (not shown), oil's price closed below its three weekly EMAs in long-term bear territory, but maybe forming a bullish 'inverse head and shoulders' pattern. Weekly technical indicators are in bearish zones but not showing any upward momentum.
FIIs were net buyers of equity on Mon. and Wed. (Jan 7 and 9) but net sellers on the other three days during the week. Their total net selling was worth Rs 5.7 Billion. DIIs were net sellers of equity on Mon., but net buyers on the other four days. Their total net buying was worth Rs 11.3 Billion, as per provisional figures.
India's IIP (Index of Industrial Production) dropped to a disappointing 17 months low of 0.5% in Nov '18 from an upwardly-revised 8.4% in Oct '18, due to a high base effect and a contraction in manufacturing growth. The previous low of 0.3% occurred in Jun '17 (a month before GST introduction).
BSE Sensex index chart pattern
The bearish 'rising wedge' pattern (refer last week's post) on the daily bar chart pattern of Sensex has morphed into a 'diamond' pattern, which usually has bearish implications. In other words, the likely breakout from the pattern is downwards.
Since a 'diamond' - a somewhat rare pattern - tends to be a reversal pattern that forms at a market top (refer this post), its formation was ignored earlier. But now it has become visibly obvious that Sensex has been consolidating within a 'diamond' during the past 10 weeks or so.
Since a 'diamond' can sometimes be a continuation pattern, an upward breakout can't be ruled out. The index has closed above its three EMAs in bull territory with a 0.9% weekly gain. That gives bulls a slight advantage.
Note that a 'diamond' can be viewed as a 'head and shoulders' reversal pattern with a bent 'neckline'. In this case, the 'head' is actually a bearish 'double top' reversal pattern with two left and two right 'shoulders'.
A 'diamond' starts out as a bearish 'broadening top', which is followed immediately by a 'symmetrical triangle' pattern. The eventual breakout follows the 'rules' of a breakout from a 'triangle'.
That means, all four possibilities are on the table - a downward breakout, an upward breakout, a 'false' upward/downward breakout, and a sideways move through the right 'apex' of the 'diamond' that negates the pattern. (Hope you are not thoroughly confused!)
Remember that the 'height' of the 'diamond' (~2300 points on Sensex chart above) should be added/subtracted to the breakout point to set the upward/downward target. Wait for the breakout before taking a buy/sell decision.
Daily technical indicators are giving conflicting signals, which is often the case during periods of consolidation. MACD is facing resistance from its gradually sliding signal line in bullish zone. ROC is about to cross below its 10 day MA in neutral zone. RSI has moved above its 50% level. Slow stochastic is rising towards its overbought zone.
Of the few Q3 (Dec '18) results announced so far, TCS has met expectations but Infosys has slipped badly. IndusInd and Bandhan Bank have shown downward pressure on margins due to large provisions for IL&FS loans.
The macroeconomic environment is favouring bears again. Oil's price has started to rise. The Rupee is slipping against the US Dollar. After weak auto sales growth in Dec '18, the shock of the dreadful IIP number in Nov '18 may be the proverbial straw that breaks the back of bulls.
NSE Nifty index chart pattern
The bearish 'rising wedge' pattern on the weekly bar chart pattern of Nifty has been replaced by a visibly obvious 'diamond' pattern. The 'diamond' is usually a 'reversal' pattern. That means the likely breakout from the pattern is downwards. (Read gory details about the 'diamond' pattern in Sensex post above.)
A 'diamond' has measuring implications. The 'height' of the 'diamond' (~700 points on Nifty chart above) should be added/subtracted to the breakout point to set the upward/downward target. Wait for the breakout before taking a buy/sell decision.
Weekly technical indicators are giving conflicting signals. MACD has merged with its signal line, and is moving sideways just below its '0' line. ROC has dropped sharply from its overbought zone. RSI has moved above its 50% level. Slow stochastic is rising towards its overbought zone.
Nifty's TTM P/E is at 26.00, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising in neutral zone, hinting at near-term index correction.
Bottomline? Sensex and Nifty charts have been consolidating within 'diamond' patterns for the past 10 weeks. Breakouts from the patterns appear imminent. Remember that an upward breakout should be accompanied by a volume surge. A downward breakout doesn't require volume support for confirmation. Wait for the breakout before initiating any buy/sell decisions.
(Note: Markets fluctuate, but there are always opportunities if you know where to look. Learn how to choose fundamentally strong stocks. Become a paid subscriber of my Monthly Investment Newsletter. A limited number of new subscriptions are being offered till Jan 21, 2019. Enrollments have started. Contact me for details: mobugobu@yahoo.com.)
