Possible Nifty retracement levels

First the bad news. FIIs were net sellers of equity worth a huge Rs 127 Billion during the previous five trading sessions (Jan 22, 25, 27-29). That is the main reason for Nifty shedding 1150 points (7.8%) from its Jan 21 lifetime top (of 14753.5) to close just below its 50 day EMA.

Now the good news. Despite the sharp correction, the index is trading well above its rising 200 day EMA. That means the bull market is alive and kicking.

So, is this index dip a good time to buy? That would depend on an investor's risk tolerance and investment time horizon. The best time to buy is when you have money to spare. 

While timing the market is always difficult, it helps not to buy near market tops. Experienced investors have the patience to wait months (sometimes even years) for better buying opportunities.

For those not so experienced, having some idea of index (or stock) retracement levels can help to decide about entry points. 

Typically, Fibonacci retracement levels of 38.2% and 50% seem to work on technical charts. What are these levels for Nifty?

Let us make a couple of assumptions. The first assumption is that the index is correcting the gains made from its Sep '20 low (of 10790). A 38.2% retracement gives a figure of around 13250; a 50% retracement means about 12800. By touching a low of 13600 on Fri. Jan 29, Nifty has almost retraced 38.2%.

Note that the index has penetrated the lower Bollinger Band. Also, the Slow stochastic indicator is well inside its oversold zone. So, a technical bounce is very much within the realm of possibilities. 

Question is: Will the likely bounce rise to a new high, or get terminated at the 20 day SMA (middle Bollinger Band, marked by green dotted line)? In the latter case, the correction may resume and the index can drop to lower levels.

That leads us to our second assumption - that Nifty is actually in the process of correcting all gains made since its Mar '20 low (of 7511). A 38.2% retracement gives a figure of around 12000; a 50% retracement can drop the index to 11150.

That leaves the door open for a test of support from the 200 day EMA - currently at 12200. What if the 200 day EMA is breached and the index does fall to 11150 (however unlikely it may seem now)?

Then we may need to reassess the sustainability of the current bull phase. The annual budget on Feb 1 can have some short-term effect on the market. Long-term, it is profitability and earnings growth of India Inc. that will decide the winners and losers.

Sticking to large-cap market leaders won't hurt.

Sensex, Nifty charts (Jun 05, 2020): FII buying fuels rally

FIIs were net buyers of equity on all five trading days. Their total buying was worth a huge Rs 139.27 Billion (which exceeded their net buying for the entire month of May '20). DIIs were net buyers of equity on Tue. and Fri. (Jun 2 and 5), but were net sellers on the other three days. Their total net selling was worth Rs 16.0 Billion, as per provisional figures.

India's Manufacturing PMI rose to 30.8 in May '20 from 27.4 in Apr '20. The Services PMI rose to 12.6 in May '20 from a dismal 5.4 in Apr '20. The Composite (Mfg. + Serv.) PMI rose to 14.8 in May '20 from 7.2 in Apr '20. (All the numbers remained well below 50, which indicates contraction.)

Passenger vehicle sales slumped 85% YoY in May '20. Maruti, Hyundai, Toyota, M&M reported more than 80% drop in their wholesale numbers. A silver lining was a 2% increase in M&M tractor sales.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex rode on the back of strong FII buying to close above its 20 day and 50 day EMAs, with a weekly gain of more than 1850 points (5.7%). Can the index continue to rally? It certainly can if FIIs remain active bulls.

However, some technical headwinds may stall the rally soon. Note the downward 'gap' that had formed on Mar 12th and was partly filled the next day. Since then, Sensex has remained below the 'gap' and faced resistance from it three days in a row during the week.

Even if the 'gap' gets completely filled, further upward progress will come up against strong resistances from the falling 200 day EMA and the 61.8% Fibonacci retracement level (35920) of the entire fall from the Jan 20th top of 42274 to the Mar 24th low of 25639.

Daily technical indicators are looking bullish and overbought. MACD has crossed above its signal line to enter bullish zone. ROC has slipped down from its overbought zone. RSI and Slow stochastic are inside their respective overbought zones. Near-term index upside appears limited.

Mid-cap and small-cap stocks have started rallying. That is usually a sign that retail investors are entering the market. The index has already rallied almost 35% from its Mar 24th low, but still remains below its sliding 200 day EMA in a bear market.

The economy is in doldrums. Corona positive cases are climbing higher each day. Service industry has been decimated. Job and salary cuts are increasing. Large share issues from RIL, Bharti, Kotak Bank have sucked liquidity from the secondary market. These are not conducive for a stock market rally.

Low interest rates, deferment of loan payments, easy availability of credit and a torrent of global liquidity seems to be funneling into India's stock market for quick gains instead of funding capital expenditure and manufacturing. This will not end well for newcomers.

If you were lucky or smart (or both) to have entered the market in late March-early April, this may be a good time to take some profit and remain invested with tight stop-losses. Fresh investments are not recommended at this stage. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty formed an upward 'gap' and climbed past its 20 week EMA but stopped short of its sliding 200 week EMA. The index gained more than 550 points (5.8%) for the week - thanks to huge FII buying - but closed below its 200 week EMA for the 13th straight week.

Weekly technical indicators are looking bullish and showing upward momentum. MACD has crossed above its signal line inside oversold zone. RSI and Slow stochastic are in neutral zones (just below their respective 50% levels). Some more near-term index upside is possible. 

Nifty's TTM P/E has risen to 23.91, which is above its long-term average and inside overbought zone. The breadth indicator NSE TRIN (not shown) has dropped inside overbought zone. Near-term index upside may be limited.
 
Bottomline? Sensex and Nifty charts have been rallying for the past two weeks on the back of FII buying, but continue to trade in bear territory. Technical resistance levels may stall the rallies soon. It may be a good idea to book partial profits, and get rid of portfolio underperformers.

Sensex, Nifty charts (Apr 03, 2020): in long-term bear markets

During Mar '20, FIIs were net sellers of equity worth a humongous Rs 658.17 Billion. It was their highest monthly net selling ever - exceeding their previous highest monthly net selling (Jan '08) by more than 2.2 times. DIIs were net buyers of equity worth an enormous Rs 555.95 Billion. It was their highest monthly net buying ever - exceeding their previous highest monthly net buying (Oct '18) by more than 2.1 times, as per provisional figures.

Automobile sales during Mar '20 fell off a cliff. The de-growth was the worst ever. Combined passenger vehicle sales fell 51% compared with Mar '19 - with all major manufacturers declaring high double digit falls. Combined commercial vehicle sales crashed 89% YoY. (Growth in CV sales is one of the first signs of economic recovery. India seems very far away from that.)

Despite the revised estimate made in the budget, direct tax collections during FY 2019-20 fell short by Rs 1.42 Trillion from the revised estimate of Rs 11.7 Trillion, and was also lower than FY 2018-19 collection of Rs 11.17 Trillion. 

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex had formed a 'reversal day' bar (higher high, lower close) on Fri. Mar 27. That marked an intermediate top at 31126. Bears ruled on a holiday-shortened trading week. The index lost more than 2200 points (~7.5%) on a weekly closing basis. All three EMAs are falling, and the index is trading below them in a bear market.

Sensex is correcting the 11 year gain of some 34000 odd points from the Mar '09 low to the Jan '20 top. A 50% Fibonacci retracement is expected to drop the index to about 25100. (The index has already touched a low of 25639.)

What if 25100 gets breached? Sensex can fall to 21300 (61.8% Fibonacci retracement level). Will it? A lot will depend on what happens after the lockdown period in India ends on Apr. 14, and how soon the corona virus gets contained in USA and Europe.

Daily technical indicators are in bearish zones after correcting oversold conditions. MACD crossed above its signal line inside oversold zone, but its upward momentum has stalled. RSI is falling towards its oversold zone, after emerging from it. Slow stochastic has fallen sharply towards its oversold zone, hinting at some more near-term index correction.

Those with no prior experience of bear markets should not be in a hurry to enter the market, despite exhortations by experts and fund managers. In a bear market, smart investors make money by selling short - an activity best avoided by small investors. This bear market is not going to end in a hurry. Wait patiently for lower prices.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty touched a higher intra-week low after 6 weeks, but bulls need not feel too enthused about that. On a closing basis, the index touched a new 3 year low of 8084, and closed well below its 200 week EMA for the fourth straight week. 

The 20 week EMA looks poised to cross below the 200 week EMA for the first time in 9 years. All three weekly EMAs are falling, which is a sign of a long-term bear market. However, the 'death cross' of the 50 week EMA below the 200 week EMA - which will technically confirm a long-term bear market - is awaited. 

Weekly technical indicators are looking bearish and oversold. MACD is falling deeper inside its oversold zone. RSI is also falling further inside its oversold zone. Slow stochastic is about to enter its oversold zone. Any technical bounce may induce more bear selling. 

Nifty's TTM P/E has moved down to 18.22, which remains above its long-term average. The breadth indicator NSE TRIN (not shown) has risen sharply into its oversold zone, hinting at some near-term index consolidation.

Bottomline? Sensex and Nifty charts have closed well below their respective 200 week EMAs for the fourth straight week. Both indices are in long-term bear markets. RBI's desperate interest rate cuts came too late to boost an economy that has been progressively devastated by shocks of demonetisation, unplanned GST implementation and now a virus lock-down. Small investors can continue with their SIPs, but should wait for the bear phase to play out.

Sensex, Nifty charts (Mar 27, 2020): short covering rallies after touching 3 year lows

FIIs eased up on their huge selling spree. They were net sellers of equity on the first four trading days, but were net buyers on Fri. Mar 27. Their total net selling was worth Rs 71.65 Billion. DIIs were net sellers of equity on Thu. Mar 26, but were net buyers on the other four days. Their total net buying was worth Rs 43.08 Billion, as per provisional figures.

RBI resorted to out-of-turn interest rate cuts in a desperate bid to stop the economy from sliding further. The Repo rate was cut by 75 bps (0.75%) to 4.4%, which is lower than its previous low of 4.74% in Apr '09. 

The Reverse Repo was cut by 90 bps (0.9%) to 4%. The CRR was cut by 100 bps (1%) to 3%, which is likely to inject Rs 1.4 Trillion into the banking system. The move is expected to encourage banks to lend more.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex dropped to touch a new 3 year low of 25639 on Tue. Mar 24 before embarking on a sharp and swift short-covering rally. The index touched an intra-day high of 31126 on Fri. Mar 27, but formed a 'reversal day' bar (higher high, lower close).

Sensex is correcting the 11 year gain of some 34000 odd points from the Mar '09 low to the Jan '20 top. A 50% Fibonacci retracement is expected to drop the index to about 25100. Tuesday's low came within 500 points of this critical level. 

Daily technical indicators are in various stages of correcting oversold conditions. MACD turned up inside its oversold zone, but is facing resistance from its falling signal line. RSI has emerged from its oversold zone, but its upward momentum has stalled. Slow stochastic has risen sharply towards its overbought zone, hinting at an end to the short-covering rally.

Sensex corrected 16600 odd points from its Jan 20th top to its Mar 24th low. A 38.2% Fibonacci retracement of the fall can take the index to about 32000. The falling 20 day EMA is at 32200. The zone between 32000-32200 will be a tough resistance to cross for the index.

Small investors with no experience of the 2008 bear market would do well to refrain from chasing the rally. Sensex may fall further before a recovery in the stock market and the economy can happen. It will be a slow grind upward taking several months - may be even a year or two.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty bounced up sharply after touching a new 3 year low of 7511, but closed well below its 200 week EMA for the third straight week. The 20 week EMA crossed below its 50 week EMA for the first time in 3 years, and both weekly EMAs are falling. The 200 week EMA is beginning to turn down.

The long-term bullish structure of the chart has been wrecked by bears. FIIs have pulled out more than Rs 580 Billion from their equity holdings during the month, and are expected to continue with their exit strategy.

Weekly technical indicators are looking bearish and oversold. MACD is falling inside its oversold zone. RSI is also falling inside its oversold zone. Slow stochastic has bounced up a bit from the edge of its oversold zone. Last week's short-covering rally should end soon. 

After touching a low of 17.15 on Mon. Mar 23, Nifty's TTM P/E moved up to 19.52, which remains above its long-term average. The breadth indicator NSE TRIN (not shown) dropped sharply into its neutral zone, where it has been treading water. Any further rally may be short-lived.

Bottomline? Sensex and Nifty charts have closed well below their respective 200 week EMAs for the third straight week - signalling the start of long-term bear markets. RBI's desperate interest rate cuts are too little too late to trigger economic growth that has been decimated by the virus lock-down. Small investors should continue with their SIPs, while waiting patiently for the correction to play out.

Sensex, Nifty charts (Mar 20, 2020): in strong bear grips

FIIs were net sellers of equity on all five trading days. Their total net selling was worth a whopping Rs 209.09 Billion. DIIs were net buyers of equity on all five days. Their total net buying was worth Rs 164.72 Billion, as per provisional figures.

India's WPI-based inflation softened to 2.26% in Feb '20 from 3.1% in Jan '20 and 2.93% in Feb '19 - thanks to cheaper food and vegetables prices. 

On Friday, Mar 20, SEBI announced a few steps to ease market volatility by limiting short positions in F&O segment, increasing margins on non-F&O stocks and revising marketwide positions limits for stock derivative contracts. (These measures will come into effect from Mon. Mar 23.)

BSE Sensex index chart pattern

Note the following comment from last week's post on the daily bar chart pattern of Sensex:

"Since 'panic bottoms' seldom hold, expect Friday's intra-day low of 29389 will be tested and breached."

It came as no surprise that the index closed well below 29389 on Wed. Mar 18, and dropped further to touch a new low of 26714 on Thu. Mar 19. 

Friday's sharp rally on short-covering and some value buying was typical of bear market rallies, and should be treated as a 'dead-cat bounce'. That means, if the index tries to rally higher, expect bears to 'sell on rise'.

Sensex appears to be correcting the 11 year gain of some 34000 odd points from the Mar '09 low to the Jan '20 top. A 50% Fibonacci retracement will drop the index to about 25100. Thursday's low came within 1600 points of this critical level.

Daily technical indicators are looking bearish and oversold. MACD is falling deeper inside its oversold zone. RSI is trying to emerge from its oversold zone. Slow stochastic is oscillating about the edge of its oversold zone. Remember that a stock market can remain oversold for long periods during a bear phase. 

The Corona virus may have been contained in China, but is spreading rapidly in Europe, USA, Australia. India will not escape its tentacles easily - whether you clap your hands on Sunday or not. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty touched a new 3 year low of 7833, and closed well below its 200 week EMA for the second straight week. The 20 week EMA has crossed below its 50 week EMA for the first time in 3 years, and both weekly EMAs are falling towards the 200 week EMA.

The long-term bullish structure of the chart has been dismantled by bears. FIIs have pulled out more than Rs 510 Billion from their equity holdings during the past three weeks, and may continue with their exit strategy.

Note that the past two weeks' steep correction, which has been blamed on the Corona virus by experts, was preceded by three weeks of correction that had dropped Nifty close to its 200 week EMA. The virus only exacerbated the already bearish mood. 

Weekly technical indicators are looking bearish and oversold. MACD is falling inside its oversold zone. RSI is also falling inside its oversold zone. Slow stochastic has bounced up a bit from the edge of its oversold zone. Friday's short-covering bounce may not last long before bears resume their selling. 

Nifty's TTM P/E has moved down further to 19.72, but remains above its long-term average. The breadth indicator NSE TRIN (not shown) has slipped down from its oversold zone, hinting at some near-term index pullback or consolidation.

Bottomline? Sensex and Nifty charts have closed well below their respective 200 week EMAs for the second straight week - signalling the end of long-term bull markets. A rapidly spreading corona virus has compounded bearish sentiment about weak economic growth and fiasco in the financial sector. Small investors should stay on the sidelines and curb any urge for bottom-fishing.

Sensex, Nifty charts (Mar 08, 2019): testing important resistance levels

FIIs were net buyers of equity on all four trading days. Their total net buying was worth Rs 41.2 Billion. DIIs were net buyers of equity on Tue. (Mar 5), but net sellers on the last three trading days. Their total net selling was worth Rs 16.9 Billion, as per provisional figures.

Government's indirect tax revenues will be under pressure during FY 2018-19 as there could be a further fall in GST revenue. Direct tax numbers are likely to be around the revised target. The fiscal deficit figure of 3.4% will be met as there will be some savings on expenditure.

Inflows into equity mutual funds (including ELSS) declined 17% in Feb '19 to Rs 51.2 Billion from Rs 61.6 Billion in Jan '19. The decline is almost 60% from Oct '18 inflow of Rs 126.2 Billion. However, SIP inflows have remained steady.

BSE Sensex index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of Sensex: "Sensex closed above its three EMAs in bull territory, but needs to move convincingly above the Fibonacci resistance zone if bulls are to regain control of the chart. Bears are doing their level best to ensure that doesn't happen any time soon."

In a holiday-shortened week, there was strong buying by FIIs. The index rose to test the upper edge of the Fibonacci resistance zone by touching an intra-day high of 36830 on Thu. Mar 7. Bears ensured that the index dropped to close about 140 points below the upper edge of the resistance zone.

The index can make another attempt to climb above the resistance zone, provided FIIs keep buying. Slowdown in the global economy and the ongoing BrExit saga may dampen their bullish fervour.  

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC has fallen from its overbought zone towards its rising 10 day MA. RSI is moving up towards its overbought zone, but its upward momentum is weakening. Slow stochastic has started correcting inside its overbought zone.

Bulls have the advantage as all three EMAs are rising, and the index is trading above them in bull territory. However, a corrective move seems likely. Many mid-caps and small-caps rose sharply during the week, and can face profit booking.

The government is on a publicity overdrive - announcing grand schemes worth trillions and giving sops to different sections of citizens - before general election dates are announced. Hope it doesn't become a case of 'too little, too late'.

Thanks to satellite TV, Internet and the proliferation of mobile phones, information dissemination has become instantaneous. Voters have become more savvy. Bullish sentiment can get a beating in the unlikely event of Modi not getting a second term. So, don't go 'all in' just yet.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed higher for the third straight week, and is trading well above its 20 week and 50 week EMAs in bull territory. But it failed to move above the Fibonacci resistance zone.

The index touched an intra-week high of 11089 - testing the 61.8% Fibonacci retracement level of 11090 - but closed inside the resistance zone, with a weekly gain of 1.6%.

Weekly technical indicators are in bullish zones. MACD is starting to move up in neutral zone. ROC is facing resistance from its sliding 10 week MA. Slow stochastic is rising above its 50% level. However, RSI is falling towards its 50% level, and showing negative divergence by failing to rise with the index.

Nifty's TTM P/E has moved up to 27.05, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone, and can trigger a corrective move.

Bottomline? For more than 4 months, Sensex and Nifty charts have been stuck in sideways ranges after sharp corrections during Sep-Oct '18. Both indices closed above their long-term moving averages in bull territories, but faced strong resistances from the upper edges of their respective Fibonacci resistance zones. Index consolidations may continue till the general elections.

WTI and Brent Crude Oil charts: overcome resistance zones but remain below 200 day EMAs

WTI Crude Oil chart

Just when it appeared that bears were getting the upper hand, the daily bar chart pattern of WTI Crude Oil rallied smartly past its 20 day and 50 day EMAs and the 'support/resistance zone' (between 53 and 55).

The bullish fervour didn't last long. The rally failed to reach its sliding 200 day EMA, and pulled back to the 'support/resistance zone' before bouncing up. Such a pullback usually provides a buying opportunity.

Oil's price needs to close convincingly above the Fibonacci resistance zone between 59 and 63 (which are the 50% and 61.8% retracement levels of the fall from the Oct '18 top of 76 to the Dec '18 low of 42) before bulls can regain control of the chart.

Daily technical indicators are in bullish zones but not showing much upward momentum. MACD is seeking support from its signal line in bullish zone. RSI is above its 50% level. Slow stochastic has fallen from its overbought zone. Some consolidation is likely before oil's price can attempt to move higher.

On longer term weekly chart (not shown), oil's price closed above its 20 week EMA but below its 50 week and 200 week EMAs in long-term bear territory. Weekly technical indicators are looking neutral to bullish. MACD is rising above its signal line in bearish zone. RSI is facing resistance from its 50% level. Slow stochastic has entered its overbought zone. 

Brent Crude Oil chart

After receiving good support from its rising 20 day EMA and the 61 level, the daily bar chart pattern of Brent Crude Oil moved smartly above the 'support/resistance zone' between 61 and 63.

Oil's price faced strong resistance from its sliding 200 day EMA, and dropped sharply towards its rising 20 day EMA before bouncing up.

For bulls to regain control of the chart, oil's price needs to close convincingly above the Fibonacci resistance zone between 68 and 72 (which are the 50% and 61.8% retracement levels of the fall from the Oct '18 top of 86 to the Dec '18 low of 50).

Daily technical indicators are in bullish zones but not showing much upward momentum. MACD is seeking support from its rising signal line in bullish zone. RSI is above its 50% level. Slow stochastic has fallen from its overbought zone. Some consolidation is likely before oil's price can attempt to move higher.

On longer term weekly chart (not shown), oil's price closed above its 20 week and 200 week EMAs in long-term bull territory, but is facing resistance from its 50 week EMA. 'Death cross' of the 50 week EMA below the 200 week EMA has been averted for now. Weekly technical indicators are looking bullish to neutral.

Sensex, Nifty charts (Feb 08, 2019): false breakouts above Fibonacci resistance zones

FIIs were net sellers of equity on Mon. (Feb 4) but net buyers on the other four trading days. Their total net buying was worth Rs 22.6 Billion. DIIs were net buyers of equity on Tue., Wed. and Thu. (Feb 5, 6 and 7) but net sellers on Mon. and Fri. Their total net selling was worth Rs 116 Million, as per provisional figures.

Sluggish returns, market volatility and political uncertainty are affecting inflows into equity mutual funds in India. Inflows in Jan '19 dropped to Rs 61.6 Billion from Rs 66.1 Billion in Dec '18 and Rs 84.1 Billion in Nov '18.

As many as 363 infrastructure projects, each worth Rs 1.5 Billion or more, have incurred cost over-runs of over Rs 3.42 Trillion due to delays in land acquisitions, forest clearance and supply of equipment. 

BSE Sensex index chart pattern

The following comments were made in last week's post on the daily bar chart pattern of Sensex: "All four technical indicators are showing negative divergences by touching lower tops. Bears can be expected to fight to defend the 36810 level." 

Strong buying by FIIs and DIIs caused the index to breakout and close above the Fibonacci resistance zone between 36140 and 36810 on Wed. Feb 6. Though it closed above 36810 for a second day, the index formed a small 'reversal day' bar (higher high, lower close).

Bears decided enough was enough. Profit booking pulled the index back inside the Fibonacci resistance zone on Fri. Feb 8. Bulls failed to regain control of the chart, as the upward breakout above 36810 turned out to be a false breakout.

Despite the sharp correction of more than 400 points on Fri., the index eked out a 0.2% gain on a weekly closing basis, and closed above its three daily EMAs in bull territory. 

Daily technical indicators are turning bearish. MACD is falling towards its signal line in bullish zone. ROC is falling towards its 10 day MA in bullish zone. RSI is seeking support from its 50% level. Slow stochastic is about to drop from its overbought zone. Some more correction seems likely.

The index had rallied on rumours of an interest rate cut by the RBI at its monetary policy meeting on Thu. Feb 7. The actual rate cut triggered a sell-off, as there was little follow-up buying due to weak corporate Q3 earnings.

FIIs have been net buyers this month. If they continue buying, bullish sentiment may revive.

NSE Nifty index chart pattern

Combined buying by FIIs and DIIs caused the weekly bar chart pattern of Nifty to breakout above the Fibonacci resistance zone intra-week. Absence of follow-up buying and profit booking pulled Nifty back inside the resistance zone by Fri. Feb 8.

The index breached the 11000 level after 4 months but failed to sustain above that psychological level. It closed above its two weekly EMAs in bull territory, with a 0.4% weekly gain.

Weekly technical indicators are turning bearish. MACD is moving above its signal line in neutral zone. ROC has crossed below its rising 10 week MA and dropped to neutral zone. RSI has turned down after facing resistance from the edge of its overbought zone. Slow stochastic is poised to fall from its overbought zone. 

Nifty's TTM P/E has moved up to 27.10, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling inside oversold zone. Some consolidation or correction is likely.

Bottomline? For more than 3 months, Sensex and Nifty charts have been retracing the sharp corrections during Sep-Oct '18. Both indices are trading above their long-term moving averages in bull territories, but are continuing to face resistances from the zone between Fibonacci 50% and 61.8% retracement levels. Repeated failures of upward breakouts may be tipping the balance towards bears.

Nifty chart: a midweek technical update (Feb 06, 2019)

FIIs were net sellers of equity on Mon. (Feb 4), but net buyers on Tue. and Wed. (Feb 5 and 6). Their total net buying was worth Rs 10.0 Billion. DIIs were also net sellers of equity on Mon., but net buyers on Tue. and Wed. Their total net buying was worth Rs 6.5 Billion, as per provisional figures.

After slipping to 53.2 in Dec '18, Nikkei India's Manufacturing PMI rose to 53.9 in Jan '19 - staying above the 50 mark (indicating growth) for the 18th straight month. However, Nikkei India's Services PMI declined to 52.2 in Jan '19 from 53.2 in Dec '18. The Composite PMI (Manufacturing+Services) was at 53.6 in Jan '19 - the same as in Dec '18.

Passenger vehicle sales remained sluggish in Jan '19. While Honda showed 23% growth, Maruti, Hyundai, M&M sales were flat. Tata Motors, Toyota, Ford Renault, Volkswagen showed degrowth. In Commercial Vehicles, Ashok Leyland and M&M showed sales growth; Tata Motors showed degrowth.

Bulls have turned the tables on bears during the first three trading days this week. The daily bar chart pattern of Nifty bounced up after receiving good support from its 20 day SMA (dotted blue line) and closed above the 11000 level after four months.

Combined net buying by FIIs and DIIs after the interim budget on Feb 1 has propelled the index above the 400 points trading range of the past couple of months. Buying in a few large cap stocks have led to Nifty's rally. 

A convincing close above 11090 - which is the Fibonacci 61.8% retracement level of the 1756 points correction from the Aug '18 top of 11760 to the Oct '18 low of 10004 - will put bulls firmly in control of Nifty's chart. 

Daily technical indicators are in bullish zones and showing upward momentum. MACD has crossed above its signal line and entered bullish zone. RSI is rising above its 50% level. Slow stochastic has entered its overbought zone. Some more upside is possible.

Note that MACD and Slow stochastic are showing negative divergences by touching lower tops. The index closed above the upper Bollinger Band today, which can cap the upside. Market breadth has been negative, with declines exceeding advancing shares. Bears are by no means out of the picture. 

Nifty's TTM P/E has moved up to 27.39 - its highest level in 2019 and much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling in neutral zone - hinting at some near-term upside.

Possibility of an interest rate cut of 25 bps (0.25%) by RBI on Feb 7 appears to have enthused bulls. Bears may attack in case RBI maintains status quo on rates.

S&P 500 and FTSE 100 charts (Feb 01, 2019): pullback rallies gain ground

S&P 500 index chart pattern

The daily bar chart pattern of SPX 500 shows a dash for glory by bulls that got halted inside the Fibonacci resistance zone between 2640 and 2710 (which are the 50% and 61.8% retracement levels respectively of the correction from the Oct 3 top of 2940 to the Dec 26 low of 2347).

In a 'V' shaped counter-trend rally from its Dec 26 low, the index had broken out above its 50 day EMA on Jan 17. For the next 6 trading sessions, it consolidated sideways - receiving good support from its 50 day EMA.

On Thu. Jan 31, the index closed above its 200 day EMA in bull territory after 2 months, but bears were not yet ready to give up control. The index gained ~1.6% for the week, but failed to close above the resistance zone.

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line in overbought zone. RSI is above its 50% level, but its upward momentum has weakened. Slow stochastic is rising inside its overbought zone, but is showing negative divergence by touching a lower top. 

Expect bears to put up a fight to defend the 61.8% Fibonacci retracement level (2710), which is treated as a trend-deciding level by many technical traders. 

On longer term weekly chart (not shown), the index closed above its three weekly EMAs after 4 months. Weekly MACD has just crossed above its signal line in bearish zone. RSI has managed to cross above its 50% level. Slow stochastic is rising towards its overbought zone.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 dropped to an intra-day low of 6734 on Mon. Jan 28 and closed below 6750. A smart recovery during the rest of the week propelled the index to a close above its 20 day and 50 day EMAs, and its previous (Jan 11) top of 7002.

The index gained more than 200 points (3.1%) on a weekly closing basis but remains well below its falling 200 day EMA in a bear market.

Daily technical indicators are looking bullish and showing upward momentum. MACD has crossed above its signal line in bullish zone. RSI is rising above its 50% level. Stochastic is rising inside its overbought zone, and can trigger a correction or some consolidation. 

On longer term weekly chart (not shown), the index closed above its 20 week and 200 week EMAs, but below its 50 week EMA in long-term bull territory. Weekly technical indicators are turning bullish. MACD has crossed above its falling signal line inside its oversold zone. RSI is climbing towards its 50% level. Stochastic is rising towards its overbought zone.