S&P 500 index chart pattern
The following comment was made in last week's post on the daily bar chart pattern of S&P 500: "Expect the falling 20 day and 50 day EMAs to provide resistance if the index tries to rally."
After falling and closing below its 200 day EMA for the second time in 6 trading sessions on Mon. Apr 2, the index attempted a rally during the next three days and moved above 2670 intra-day on Thu. Apr 5.
Resistance from the falling 20 day EMA prevented the rally from progressing further. More trade sanctions against China announced by Trump was just the excuse bears needed to sell.
On Fri. Apr 6, the index fell sharply below its 200 day EMA intra-day, but bounced up to close just above it - losing about 1.4% on a weekly closing basis.
Daily technical indicators have corrected oversold conditions, but remain in bearish zones and are not showing any upward momentum. Bulls are desperately trying to defend the 200 day EMA. The volume bars show that their resolve is weakening.
Some technical experts have suggested that the index has formed a 'double bottom' reversal pattern, and the correction is over. Is it? Trading volumes suggest otherwise.
Volumes during formation of the first bottom (at 2533 on Feb 9) were much higher than on Apr 2, when the index touched the second bottom of 2554. For a 'double bottom' to be technically valid, volumes during formation of the second bottom should be higher.
On longer term weekly chart (not shown), the index fell below its 50 week EMA intra-week, but managed to close above its 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are looking bearish and showing downward momentum.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 rallied past its falling 20 day EMA and the resistance level of 7100 during the week. Oversold weekly technical indicators may have triggered the rally.
Twin resistances from the falling 50 day EMA and the 7200 level brought the rally to a halt. Though the index closed below 7200, it gained 1.8% on a weekly closing basis. (At the time of writing this post, the index is struggling to cross above 7200.)
Daily MACD and RSI are showing upward momentum in bearish zones. Slow stochastic has entered its overbought zone, which is a bearish sign. Some consolidation between 7100 and 7200 is possible.
The 'death cross' (marked by blue circle) of the 50 day EMA below the 200 day EMA had technically confirmed a bear market. Bears will continue to 'sell on rise'.
On longer term weekly chart (not shown), the index closed above its 200 week EMA, but below its 20 week and 50 week EMAs. The 20 week EMA has crossed below the 50 week EMA after 20 months. Weekly technical indicators are correcting oversold conditions.
FIIs have turned bears again. Their net selling during the first week of trading in FY 18-19 was worth Rs 13.6 Billion. DIIs were net buyers of equity worth Rs 26.6 Billion, as per provisional figures.
Both Sensex and Nifty broke out above downward-sloping channels within which they were correcting during the previous 6 weeks. Sensex gained 2% and Nifty gained 2.1% on a weekly closing basis.
Nikkei India's Services PMI improved from 47.8 in Feb '18 to 50.3 in Mar '18. The Composite PMI (Manufacturing + Services) rose from 49.7 in Feb '18 to 50.8 in Mar '18. A number >50 indicates expansion.
BSE Sensex index chart pattern
After a failed attempt to cross above the upper edge of the downward-sloping channel, followed by a drop to seek support from the 200 day EMA on Wed. Apr 4, the daily bar chart pattern of Sensex overcame resistance from its 20 day EMA and broke out above the channel on Thu. Apr 5.
RBI's status quo on interest rates helped the bullish cause, but there is no need to celebrate just yet, as resistance from the 50 day EMA plus proximity to the upper edge of 'Support/Resistance zone 1' (at 33800) prevented the index from rallying further.
By crossing above the downward-sloping channel, Sensex is trying to retrace the 3960 points fall from the Jan 29 top of 36444 to the Mar 23 low of 32484. Fibonacci retracement levels of 38.2% and 50% means near-term upward index targets of about 34000 to 34450.
Both those retracement levels are below the 'gap' formed on Feb 5. Bears will remain in control as long as Sensex trades below the 'gap'.
Daily technical indicators are turning bullish - hinting at some more index upside. MACD has crossed above its signal line in bearish zone. ROC has entered bullish zone after crossing above its 10 day MA. RSI is again facing resistance from its 50% level. Slow stochastic is rising towards its overbought zone.
With Q4 (Mar '18) results season upon us, small investors should select their 'buy list' carefully from the better performers. Even during the correction, some stocks out-performed the Sensex by correcting less or rising higher.
NSE Nifty index chart pattern
Good support from the 50 week EMA and oversold weekly ROC and Slow stochastic indicators triggered a breakout above the downward-sloping channel within which the weekly bar chart pattern of Nifty had been correcting for the previous 6 weeks.
The index is facing resistance from its 20 week EMA. Above it is the longer-term 'support/resistance' level of 10490.
The index may be retracing the 1220 points fall from the lifetime Jan '18 high of 11172 to the Mar '18 low of 9952. Fibonacci retracement levels of 38.2% and 50% means near-term upward index targets of about 10400 to 10550.
Both those retracement levels are below the 'gap' formed on Feb 5. Bears will continue to dominate as long as Nifty trades below the 'gap'.
Weekly technical indicators have stopped falling and are trying to turn up - hinting at some more index upside. But the correction is not over yet.
Nifty's TTM P/E has moved up to 25.65 - which is well above its long-term average. The breadth indicator NSE TRIN (not shown) has started falling in oversold zone, and can lead to some more index upside.
Bottomline? Sensex and Nifty charts have broken out above downward-sloping channels, but it is too soon for bulls to celebrate. Several recent IPOs have diverted liquidity from the secondary market. Some more correction and/or consolidation is likely. Await Q4 (Mar '18) results before rushing in to buy/sell.
Stock market bottoms can be challenging to spot. And many times, investors think that they have found this point, only for the major averages to head even lower.
The big question many have is: just how do you know when a market bottom has taken place?
This requires the tools and indicators that have identified major market bottoms in the past, and an understanding of what they are, how they work and that each indicator must correlate a similar reading.
Read more here.
FIIs were net sellers of equity on Mon. & Tue. (Apr 2 & 3) but net buyers today. Their total net selling was worth Rs 7.3 Billion. DIIs were net buyers of equity on Mon. & Tue. but net sellers today (Apr 4). Their total net buying was worth Rs 7.4 Billion.
Auto sales in Mar '18 showed good growth over Mar '17. Tata Motors (35%), TVS (27%), Royal Enfield (27%), Honda Motorcycle (23%), Ashok Leyland (20%), Maruti (15%), M&M (10%), Hyundai (7%) showed decent growth. Honda Car (-28%) and Toyota (-9%) showed de-growth.
India's manufacturing activity fell to a 5 months low as factory output and new orders rose at their slowest pace since Oct '17. The Nikkei India's Manufacturing PMI slipped to 51 in Mar '18 against 52.1 in Feb '18. However, it was the 8th straight month of expansion (a number >50).
The daily bar chart pattern of Nifty continues to trade below a 33 points downward 'gap' formed on Feb 5 '18, and has been correcting within a downward-sloping channel for the past 7 weeks.
A brief intra-day foray above the 20 day EMA and the upper edge of the downward-sloping channel today was met with strong bear selling on fears of an escalating trade war between USA and China.
The index formed a large 'reversal day' bar (higher high, lower close) - wiping out the gains of the previous two days - and dropped to test support from its 200 day EMA.
The support from the 200 day EMA is unlikely to hold, as it had been breached twice already. Expect the index to move down towards its lower edge. Bulls may try to defend the (psychological) 10000 level.
Daily technical indicators are in bearish zones. RSI and Slow stochastic showed positive divergences by not falling lower with the index. That may have triggered the technical bounce towards the top of the channel.
Nifty's TTM P/E has moved up to 25.14 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has entered its oversold zone, and can limit index downside.
RBI's monetary policy meeting tomorrow (Apr 5) is expected to maintain status quo on interest rates. The next bullish trigger may come if Q4 (Mar '18) results show any significant improvement over Q3 (Dec '17) results.
Till then, Nifty is likely to grind down within the channel.
Gold chart pattern
Since the second week of Jan '18, the daily bar chart pattern of Gold has been consolidating sideways within a broad 60 points rectangular range (between 1305 and 1365).
Note that the entire consolidation has occurred above the rising 200 day EMA in a bull market, with gold's price receiving support from the zone between 1300 & 1310, and facing resistance from the zone between 1360 & 1370.
Rectangular consolidation patterns are often continuation patterns. Since gold's price entered the consolidation zone after a rally from its Dec '17 low, the probability of an upward breakout above the resistance zone (between 1360 & 1370) is greater.
However, it may be better for longer-term investors to wait for the eventual breakout to initiate any buy/sell action because a 'rectangle' is a fickle pattern that can also act as a 'reversal pattern'.
Daily technical indicators are in bullish zones, and showing slight upward momentum. Another test of resistance from the zone between 1360 & 1370 is likely. Keep a close watch on the US Dollar index to get clues about gold's future price movements.
On longer term weekly chart (not shown), gold’s price closed above its three rising weekly EMAs in long-term bull territory. Weekly technical indicators are in bullish zones, but not showing any upward momentum. Some more consolidation is likely.
Silver chart pattern
Since the beginning of Feb '18, the daily bar chart pattern of Silver has been consolidating sideways in a rectangular range (between 16.10 & 16.90) in bear territory.
Silver's price has been facing resistance from its gradually sliding 200 day EMA, and getting strong support from the zone between 16.10 & 16.20.
Daily technical indicators are looking bearish to neutral, but are showing positive divergences by touching higher tops while silver's price has been touching lower tops.
A rally above the 200 day EMA is a possibility. Bears are likely to use the opportunity to sell again.
On longer term weekly chart (not shown), silver’s price closed at its 20 week EMA, but below its sliding 50 week and 200 week EMAs in a long-term bear market. Weekly MACD and Slow stochastic are in bearish zones. RSI is in neutral zone.
S&P 500 index chart pattern
The following remarks were made in last week's post on the daily bar chart pattern of S&P 500: "A technical bounce is a possibility. However, bears are likely to adopt a 'sell on rise' approach to maintain dominance."
After closing below its 200 day EMA for the first time since Nov '16, the index bounced up as expected on Mon. Mar 26 and touched the week's high of 2675 on Tue. Mar 27.
Bears used the opportunity to sell. The index tested support from its 200 day EMA on the next two days, and then bounced up on Thu. Mar 29 - probably on short-covering before the long Easter weekend - to close with a 2% weekly gain.
Note that volume bars on two down-days (Tue. & Wed.) were higher. Bears are unlikely to give up their dominance easily - even though the index managed to close above its 200 day EMA in bull territory through the week.
Daily technical indicators are in bearish zones, and not showing any upward momentum. MACD is below its falling signal line in oversold zone. RSI bounced up after receiving support from the edge of its oversold zone, but stayed below its 50% level. Slow stochastic is inside its oversold zone.
Expect the falling 20 day and 50 day EMAs to provide resistance if the index tries to rally. There is real danger of the index breaching support from its 200 day EMA and falling below its Feb '18 low. That can trigger a deeper correction.
On longer term weekly chart (not shown), the index faced resistance from its 20 week EMA, but closed above its 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are looking bearish and showing downward momentum.
FTSE 100 index chart pattern
The following remarks were made in last week's post on the daily bar chart pattern of FTSE 100: "A technical bounce is possible. Expect bears to use it as a selling opportunity."
The index received support from the long-term support level of 6875, and bounced up as expected. It even managed to cross above the 7100 level intra-day on Thu. Mar 29. Bears used the opportunity to sell.
The index closed below 7100 and the falling 20 day EMA, but gained almost 2% on a weekly closing basis.
All three EMAs are falling, and the index is trading below them in a bear market. The 'death cross' (marked by blue circle) of the 50 day EMA below the 200 day EMA had technically confirmed a bear market.
Daily technical indicators are in bearish zones. Only Slow stochastic is showing upward momentum. The index may consolidate within the two 'support/resistance' levels marked on the chart, but the 6875 level is likely to get breached sooner than later.
On longer term weekly chart (not shown), the index bounced up after receiving support from its 200 week EMA, but closed well below its 20 week and 50 week EMAs. The 20 week EMA has crossed below the 50 week EMA after 20 months. Weekly technical indicators are looking oversold.
During Mar '18, FIIs and DIIs were both net buyers of equity - worth Rs 79 Billion and Rs 66.9 Billion respectively, as per provisional figures. Yet, Sensex and Nifty lost about 3.6% on a monthly closing basis. How come?
There are more to those numbers than meets the eye. The bulk of FII buying - of Rs 70.3 Billion - occurred on a single day (Mar 13) when TCS shares were offloaded by Tata Sons.
The bulk of DII buying - of Rs 61.5 Billion - occurred during the last 3 days of trading (Mar 26-28). A case of financial year-end NAV management by mutual funds?
GST collection in Feb '18 slipped to Rs 852 Billion from Rs 863 Billion in Jan '18, even as number of registered taxpayers under GST rose to 10.5 million from 10.3 million.
India's fiscal deficit during Apr '17-Feb '18 was 20% more than the revised estimates for FY 17-18 due to increased expenditure and subdued revenue receipts.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex has been trading below the 132 points 'breakaway gap' formed on Feb 5 '18. The downward-sloping channel within which the index has been correcting for the past 6 weeks has been redrawn slightly to reflect last week's holiday-shortened trading.
The 243 points downward 'gap' formed on Fri. Mar 23 got completely filled on the next trading day (Mon. Mar 26). That means, the possibility of the 'gap' being a 'measuring gap' (see last week's post), along with its associated downward target, is being discarded for now.
Bulls need not start rejoicing. As often happens when a 'gap' (upward or downward) gets filled, the previous move resumes. On Tue. Mar 27, the index faced resistance from the falling 20 day EMA and formed a 'doji' candlestick pattern.
On Wed. Mar 28, the index ended FY 17-18 by dropping to test support from its 200 day EMA, and just managed to close above it in bull territory. The 32550 level (lower edge of 'support/resistance zone 1') provided good support when the 200 day EMA got breached on Fri. Mar 23.
In case the support gets breached, expect stronger support from 'support/resistance zone 2' (between 31400 and 30700). Interestingly, on the daily closing chart of Sensex (not shown), a head-and-shoulders reversal pattern appears to have formed. The pattern has a downward target of 31240, which is inside 'support/resistance zone 2'.
Daily technical indicators are in bearish zones. MACD has merged with its sliding signal line. ROC is falling below its 10 day MA. RSI faced resistance from its 50% level and has started falling, but is showing positive divergence by moving sideways and not falling lower with the index.
Slow stochastic is the only indicator showing upward momentum, but in bearish zone. Any attempt by the index to move up towards the upper edge of the channel is likely to induce bear selling.
A 'sell on rise' strategy should continue to work well as long as the near-term trend is down. The longer-term bullish structure of the index remains intact.
NSE Nifty index chart pattern
For the past 8 weeks, the weekly bar chart pattern of Nifty has been trading below the 33 points downward 'gap' formed on Feb 5 '18. The correction within a (redrawn) downward-sloping channel has completed 6 weeks.
The index has received good support from its 50 week EMA so far. In case the index falls below its 50 week EMA, expect stronger support from the zone between 9700-9500.
Weekly technical indicators are looking bearish and oversold. MACD is falling below its signal line, and is poised to enter bearish zone. RSI is sliding below its 50% level. ROC and Slow stochastic are inside their respective oversold zones, which they have entered for the first time since Nov '17.
Nifty's TTM P/E ended FY 17-18 at 24.66 - remaining well above its long-term average through the year. The breadth indicator NSE TRIN (not shown) is rapidly rising in neutral zone, and can limit near-term index downside.
Bottomline? Sensex and Nifty charts are correcting within downward-sloping channels. Both indices can undergo deeper corrections. Several recent IPOs have diverted liquidity from the secondary market. A 'sell on rise' strategy should continue to work well in the near-term.
