S&P 500 index chart pattern
The daily bar chart pattern of S&P 500 dropped below the 'rising wedge' and its 20 day EMA intra-day on Mon. May 6, but pulled back to close just inside the 'wedge' by the end of the day.
Bears took control on Tue. May 7. The index dropped sharply below its 20 day EMA and closed below it, but received good support from its 50 day EMA. The next day, the index traded below its 20 day EMA but above its 50 day EMA.
An intra-day fall below the 50 day EMA on Thu. May 9 was followed by a pullback and close above it. On Fri. May 10, the index formed an 'outside day' candlestick pattern (lower low, higher high), but failed to close above its falling 20 day EMA - losing 2.2% on a weekly closing basis.
Daily technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. RSI is trying to recover after falling below its 50% level. Slow stochastic has bounced up a bit from the edge of its oversold zone.
Friday's 'outside day' candlestick may be hinting at a continuation of the down trend that started after the index touched its lifetime high of 2954 on May 1.
Inconclusive US-China trade talks and increased US tariffs on Chinese imports should encourage bears to press home their advantage.
On longer term weekly chart (not shown), the index dropped to test support from its 20 week EMA, and closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but 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: "The index appears to be forming a large 'cup and handle' pattern, from which the likely breakout is upwards. The 'handle' of the 'cup' is in the process of getting formed... A fall below 7000 will negate the pattern."
The ongoing US-China trade war has affected bullish sentiment in global stock markets. FTSE succumbed to the bears - falling sharply below its 50 day EMA on Tue. May 7, but receiving brief support from its 200 day EMA.
On Thu. May 9, the index dropped below its 200 day EMA into bear territory but managed to cling on to the 7200 level by the end of the week - losing 2.4% on a weekly closing basis. The 'cup and handle' pattern has not been negated yet.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line in bearish zone. RSI is falling towards its oversold zone. Stochastic is inside its oversold zone, and can trigger a technical bounce.
On longer term weekly chart (not shown), the index closed just below its merged 20 week and 50 week EMAs, but above its 200 week EMA in long-term bull territory. Weekly technical indicators are looking bearish, and showing downward momentum. MACD has started falling above its signal line in bullish zone. RSI has slipped below its 50% level. Stochastic is falling towards its 50% level.
FIIs were net sellers of equity on all five trading days. Their total net selling exceeded Rs 41.9 Billion. DIIs were net buyers of equity on all five trading days, but couldn't match the pace of FII selling. Their total net buying was worth Rs 28.8 Billion, as per provisional figures.
India's IIP contracted to -0.1% in Mar '19 from 0.1% growth in Feb '19. It was the lowest IIP number in 21 months. IIP in Mar '18 was 5.3%. On annual basis, IIP slowed to a 3 year low of 3.6% in FY 2018-19 against 4.4% in FY 2017-18 and 4.6% in FY 2016-17.
According to CRISIL, operating margins of domestic cotton yarn spinners may shrink by 1-1.5% in FY 2019-20 due to lower cotton output, rising cotton prices and moderating demand.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex shows a sharp downward breakout from a 'diamond' reversal pattern, due to heavy selling by FIIs. Though the index has dropped below its 20 day and 50 day EMAs, it is trading above its 200 day EMA in a bull market.
Can the index fall even lower? Anything is possible when FIIs decide to turn bears. However, by touching an intra-day low of 37370 on Fri. May 10, the index has already corrected 50% of the last leg of its (2 months long, 4200 points) rally from the Feb 19th low to the Apr 18th top.
The 125 points upward 'gap' formed on Mar 12 can provide some support. The 61.8% Fibonacci retracement level of the 4200 points rally is at 36890 - which falls in between the 'gap' and the 200 day EMA.
In case the index falls below 36890, there is likely to be stronger support from the 200 day EMA and the (blue) up trend line. In other words, Sensex is just above a strong support zone, from where a technical bounce can be expected.
The level of the right apex of the 'diamond' (~39000) can act as a resistance if and when a likely technical bounce moves the index above the 50 day and 20 day EMAs. Sensex may consolidate within a 2000 points range (between 37000 and 39000) till election results are announced on May 23.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line in bearish zone. ROC, RSI and Slow stochastic have entered their respective oversold zones, and are showing negative divergences by falling below their Feb '19 lows. Some more downside is possible before a technical bounce occurs.
Finance Ministry mandarins are trying to 'invent' new arguments on a daily basis to put positive spins on negative data that are clearly pointing to worsening economic conditions (viz. unemployment, falling auto and FMCG sales, NBFC loan defaults, lower IIP and GDP).
What should small investors do now? What they should be doing at all times: follow a financial plan and asset allocation plan, and continue with monthly SIPs. Treat daily market gyrations as entertainment.
NSE Nifty index chart pattern
The following comment appeared in last week's post on the weekly bar chart pattern of Nifty: "The index ... appears to have formed a 'diamond' pattern, which usually acts as a trend reversal pattern at a market top."
FIIs may not have read the post, but they sure respected the reversal pattern, and started selling heavily during the week. The index dropped sharply to seek support from its 20 week EMA - negating all gains made in the previous 7 weeks.
Below the 20 week EMA is a support zone between 11100 and 11230. The 50% Fibonacci retracement level of the 1270 points rally from the Feb '19 low of 10586 to the Apr '19 top of 11856 is at 11220 - which is just below the upper edge of the support zone.
If the support zone gets breached, expect stronger support from the 50 week EMA and the (blue) up trend line. As long as the index trades above its 50 week EMA, the bull market will remain in force.
Weekly technical indicators have started correcting overbought conditions. MACD has slipped down from its overbought zone, and is falling towards its rising signal line. ROC has crossed below its 10 week MA and fallen from its overbought zone. RSI has dropped from its overbought zone. Slow stochastic is about to follow suit. Some more correction is possible before a technical bounce can occur.
Nifty's TTM P/E has moved down to 28.14, which remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone and can limit near-term index downside.
Bottomline? Sensex and Nifty charts have broken out below 'diamond' patterns, which often signal trend reversals. Stay invested, follow your asset allocation plans and let the correction play out before jumping in.
FIIs have decided to 'sell in May and go away'. They were net sellers of equity on all three trading days this week. Their total net selling was worth Rs 22.9 Billion. DIIs were net buyers of equity on all three trading days. Their total net buying was worth Rs 11.4 Billion, as per provisional figures.
Nikkei India's Services PMI dropped to a 7 months low of 51 in Apr '19 from 52 in Mar '19. A figure above 50 indicates expansion. The Composite PMI (Manufacturing + Services) fell to 51.7 in Apr '19 from 52.7 in Mar '19.
Key data used for calculating India's GDP growth under the new method are faulty, as per NSSO, as 36% of the companies taken into account for the calculation are either untraceable or wrongly categorised.
The daily bar chart pattern of Nifty shows a 'diamond' reversal pattern that has stopped the pre-election rally (from the Feb 19 low of 10586) on its tracks. Is this a sign that the stock market is worried about the outcome of ongoing general election?
A breakout with a 'gap' below the 'diamond' and a close below the 20 day EMA on Mon. May 6 rang a warning bell about a change of trend from bull to bear. Follow-up selling on Tue. and Wed. (May 7 and 8), and a close below the 50 day EMA after more than two months, should send bulls scurrying for cover.
Note that Monday's downward 'gap' was partly filled by Tuesday's bearish engulfing pattern (higher high, lower low). The 'gap' can act as a resistance for future up moves. Even if the 'gap' gets completely filled, expect the level of the right apex of the 'diamond' (~11750) to act as stronger resistance.
On the downside, there is an unfilled upward 'gap' of 46 points (formed on Mar 12). Expect Nifty to find some support at the 'gap' zone.
Daily technical indicators are bearish and showing downward momentum. MACD is falling below its signal line in bullish zone. RSI is falling below its 50% level. Slow stochastic has dropped inside its oversold zone, and can trigger a technical bounce.
Nifty's TTM P/E has moved down to 28.38, which remains much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone - hinting at possible near-term index recovery.
Expect the market to remain volatile till election results are announced on Mar 23. Check Q4 (Mar '19) corporate results carefully for the odd few positive surprises. Those are the companies that can lead the market as and when the bull rally resumes.
As long as Nifty trades above its rising 200 day EMA, bulls should not worry too much. However, the possibility of a deeper correction can't be ruled out - in the unlikely event that the NDA fails to form a government.
WTI Crude Oil chart
After a bit of sideways consolidation near the upper edge of the 'support-resistance zone' (between 62 and 64), the daily bar chart pattern of WTI Crude Oil bounced up to touch a high of 66.60 on Apr 23 - its highest level in nearly 6 months.
The 'golden cross' of the 50 day EMA above the 200 day EMA technically confirmed a return to a bull market. However, overbought technical indicators, which showed negative divergences by touching lower tops, triggered a correction.
Oil's price dropped below the 'support-resistance zone' and its 20 day and 50 day EMAs, but bounced up after testing support from its 200 day EMA. Formation of a 'reversal day' bar (lower low, higher close) and a pullback inside the 'support-resistance zone' ought to encourage bulls.
Daily technical indicators are looking bearish after correcting overbought conditions. MACD is falling below its signal towards neutral zone. RSI has dropped below its 50% level. Slow stochastic has fallen to the edge of its oversold zone.
Expect volatility and some consolidation in oil prices as the US government threatens to shut down Iran's oil exports by sending war ships to the Middle East.
On longer term weekly chart (not shown), oil's price bounced up after receiving strong support from its converging weekly EMAs, and closed in long-term bull territory. Weekly technical indicators are in bullish zones, but not showing much upward momentum. MACD is rising above its signal line. RSI is moving sideways above its 50% level. Slow stochastic has fallen from its overbought zone, and can trigger some consolidation or correction.
Brent Crude Oil chart
After a few days of sideways consolidation near the upper edge of the 'support-resistance zone' (between 70 and 72), the daily bar chart pattern of Brent Crude Oil broke out upwards on Apr 22, and rose to touch a 6 months high of 75.60 on Apr 25.
The 'golden cross' of the 50 day EMA above the 200 day EMA technically confirmed a return to a bull market. However, overbought technical indicators, and formation of a 'reversal day' bar (higher high, lower close), triggered a correction below the 'support-resistance zone' and the 20 day and 50 day EMAs.
Oil's price has since pulled back inside the 'support-resistance zone', and is expected to consolidate till Middle Eastern supplies stabilise.
Daily technical indicators are looking bearish to neutral after correcting overbought conditions. MACD is falling below its sliding signal line towards neutral zone. RSI is seeking support from its 50% level. Slow stochastic has fallen below its 50% level.
On longer term weekly chart (not shown), oil's price bounced up after testing support from its converging 20 week and 50 week EMAs, and closed in long-term bull territory. Weekly technical indicators are in bullish zones, but not showing much upward momentum. MACD is rising above its signal line. RSI is moving sideways above its 50% level. Slow stochastic has slipped down from its overbought zone, and can trigger some consolidation or correction.
S&P 500 index chart pattern
The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "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."
On Wed. May 1, the index touched a new lifetime high of 2954 but formed a 'reversal day' bar (higher high, lower close) and closed at the lower edge of the 'wedge' - below its previous top of 2941.
Bears took advantage. Their selling triggered a breakout and a close below the 'wedge' on Thu. May 2. Note that the index closed above its 20 day EMA despite an intra-day fall below it; i.e. technically, support from the 20 day EMA held firm.
Bulls engineered a sharp pullback on Fri. May 3, ensuring that the index closed inside the 'rising wedge' with a 6 points weekly gain. However, Friday's lower volumes may enthuse bears to try another downward breakout. All three EMAs are rising and the index is trading above them in a bull market.
Daily technical indicators are in bullish zones after correcting overbought conditions. MACD is moving sideways below its signal line. RSI is trying to re-enter its overbought zone after falling below it. Slow stochastic is falling towards its neutral zone.
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 slowly rising above its 50% level. Slow stochastic is well inside its overbought zone.
FTSE 100 index chart pattern
After touching a high of 7529 on Apr 23, the daily bar chart pattern of FTSE 100 faced profit-booking. The index dropped below its 20 day EMA, but has bounced up after receiving support from its 50 day EMA.
Daily technical indicators are looking neutral to bearish. MACD is falling below its signal line in bullish zone. RSI is in neutral zone after falling below its 50% level. Stochastic is trying to emerge from its oversold zone, and probably triggered Friday's technical bounce.
The index appears to be forming a large 'cup and handle' pattern, from which the likely breakout is upwards. The 'handle' of the 'cup' is in the process of getting formed.
If the pattern plays out - with a convincing move above 7500 - much higher index levels (above 8000) are likely in the medium term. A fall below 7000 will negate the pattern.
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, but not showing much upward momentum. MACD is still rising above its signal line. RSI has started to fall towards its 50% level. Stochastic is poised to fall from its overbought zone.
In a trading week with two holidays, FIIs were net buyers of equity on Tue. and Thu. (Apr 30 and May 2), but net sellers on Fri. (May 3). Their total net buying was worth Rs 3.1 Billion. DIIs were net buyers of equity on Tue. and Fri., but net sellers on Thu. Their total net selling was worth Rs 0.5 Billion, as per provisional figures.
Passenger vehicle sales dropped 17% YoY in Apr '19 - the worst decline since Oct '11. All the major OEMs showed declines between 9% (M&M) to 42.5% (Nissan). Honda bucked the trend with growth of 23%.
Nikkei India's Manufacturing PMI fell to 51.8 in Apr '19 from 52.6 in Mar '19 (a figure above 50 indicates expansion). It was the slowest pace of expansion in 8 months.
BSE Sensex index chart pattern
For the past 5 weeks, the daily bar chart pattern of Sensex has been consolidating sideways near the upper edge of a large upward-sloping trading channel.
In the process, the index appears to have formed a 'diamond' pattern - which can be looked upon as a 'head and shoulders' pattern with a bent 'neckline'. Such a pattern is usually a trend reversal pattern, and should be treated with caution. (Read more about the diamond pattern here and here.)
Daily technical indicators are looking neutral to bearish, and showing downward momentum. MACD is sliding below its falling signal line in bullish zone. ROC has slipped below its 10 day MA in neutral zone. RSI and Slow stochastic are seeking support from their respective 50% levels.
All four technical indicators had showed negative divergences by failing to touch new highs when the index touched its lifetime high of 39487 on Apr 18. That is often a warning of a possible change in trend.
Note that Sensex is trading above its three EMAs in a bull market. In a bull market, one makes money by going long. Formation of a 'reversal pattern' should be respected, but short the index if and when a downward breakout from the 'diamond' occurs.
If FIIs remain buyers, their liquidity flows can overcome technical and fundamental headwinds. They seem to have 'discounted' a second term for the NDA. If an unlikely upset occurs on May 23, all their bullish bets will be off.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty has been consolidating sideways near the upper edge of an upward-sloping trading channel for the past five weeks.
The index is trading well above its weekly EMAs in a long-term bull market, but appears to have formed a 'diamond' pattern, which usually acts as a trend reversal pattern at a market top.
All four weekly technical indicators are well inside their respective overbought zones. While an index can remain overbought for long periods, the formation of a 'reversal pattern' should be treated with respect and caution.
Lok Sabha election results are less than three weeks away. Corporate Q4 (Mar '19) results declared so far have not shown much improvement. Economic fundamentals are turning weak. Investors would do well not to go bargain hunting now.
Nifty's TTM P/E has moved down to 29.24, which remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is in neutral zone - hinting at some more consolidation or correction.
Bottomline? Sensex and Nifty charts are still hovering near the upper edges of their respective upward-sloping trading channels, but may be forming 'diamond' reversal patterns. Stay invested, follow your asset allocation plans and control any impulse to dive into a market near a lifetime high.
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With a modicum of intelligence, the right amount of time, and some dedicated study, you may be able to do it yourself. No one works for free, after all, and if you hire a financial advisor or choose a robo-advisor, you will pay for that service in one way or another.
Read more at:
https://www.investopedia.com/articles/personal-finance/060415/financial-planning-can-you-do-it-yourself.asp
