Gold chart pattern
The following remarks were made in the previous post on the daily bar chart pattern of Gold: "A convincing move above 1265 can lead to a test of the Apr 17 top. Bears may use the rise to sell again."
The rally in gold's price continued past 1265 and touched a high of 1286 on Mon. Jun 5 - still about 10 points short of the Apr 17 top - but formed a 'doji' candlestick pattern that indicates indecision among bulls and bears.
Daily technical indicators are in bullish zones, with MACD and RSI showing upward momentum. However, Slow stochastic is well inside its overbought zone, but its upward momentum has stalled.
A convincing move above 1296 is required for the bullish pattern of 'higher tops, higher bottoms' to continue. Bears will try to prevent such a move.
On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are in bullish zones and showing upward momentum.
Silver chart pattern
The following comment appeared in the previous post on the daily bar chart pattern of Silver: "Silver's price will require a strong move above its sliding 200 day EMA to escape from the bear stranglehold on the chart."
Silver's price faced resistance from its 200 day EMA and dropped down to seek support from its rising 20 day EMA. A strong volume surge on Fri. Jun 2 propelled silver's price above its 200 day EMA into bull territory.
Daily technical indicators are looking bullish. Slow stochastic is inside its overbought zone, but its upward momentum has stalled.
Silver's rally may continue a bit longer, but expect bears to pounce at any time.
On longer term weekly chart (not shown), silver’s price closed above its entangled 20 and 50 week EMAs, but below its sliding 200 week EMA in a long-term bear market. Weekly technical indicators are in neutral zones, with Slow stochastic showing upward momentum.
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: "Some consolidation around current levels and a pullback towards 2400 are possibilities."
In a holiday-shortened trading week, the index consolidated sideways on Tue. and Wed. (May 30 & 31), dropping to a low of 2403 on Wed. with a volume surge before bouncing up to close just a point lower than Tuesday's close of 2413.
The index rose to touch a new high of 2440 on Fri. Jun 2, but closed a point lower - gaining almost 1% on a weekly closing basis.
All three EMAs are rising, and the index is trading above them in a bull market. However, daily technical indicators are looking overbought. Also, the previous two days' rally was supported by sliding volumes.
Some consolidation, and a correction towards 2420 are possibilities.
On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking overbought and 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 touched a new high of 7599 on Fri. Jun 2, but closed at 7548 - just 4 points higher than the day's opening level, and absolutely flat for the week.
A 'shooting star' candlestick pattern, which often marks the end of an intermediate up move, was formed by Friday's trade.
Daily technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index.
Slow stochastic has started to fall after forming a 'double top' reversal pattern inside its overbought zone - giving an early warning of a correction.
The index continued to trade within a bearish 'rising wedge' pattern. A downward breakout from the pattern - towards the rising 20 day EMA - is likely.
On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market, but formed a 'long-legged doji' candlestick pattern that often indicates a change of trend. Weekly technical indicators are looking overbought and showing negative divergences by failing to touch new highs with the index.
FIIs were net sellers of equity worth Rs 4.54 Billion during the week - but they were net buyers worth more than Rs 10 Billion on Wed. May 31.
As per provisional figures, DIIs were net buyers of equity worth Rs 1.12 Billion for the week - but they were net sellers worth worth more than Rs 9 billion on Wed. May 31.
Both Sensex and Nifty touched new highs - gaining 0.8% and 0.6% respectively on a weekly closing basis.
Passenger vehicle sales grew about 9% in May '17 against 14.7% in Apr '17. Maruti, Tata Motors, Ford and Honda sales grew in double digits. M&M, Hyundai and Renault sales grew in low single digits. Toyota had negative growth.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex had closed for the first time above the 31000 level on Fri. May 26. It failed to make much progress, closing within a 50 points range during the first four days of the week.
On Fri. Jun 2, the index crossed the 31300 level intra-day and closed at a new high of 31273. All three EMAs are rising, and the index has closed above them in a bull market.
The up trend from the Dec '16 low is intact, as the index continues to trade above 'fan line 3' (after breaching 'fan lines' 1 & 2).
Daily technical indicators are looking overbought. Three of them - ROC, RSI, Slow stochastic - continue to show negative divergences by failing to touch new highs with the index.
Sensex can remain overbought for long periods during a bull market. However, a correction may be just around the corner. The index is trading 2750 points above its 200 day EMA, which is an indication of extremely overbought condition as per empirical observation.
Stay invested, but with a trailing stop-loss. Try to avoid any impulsive buying.
NSE Nifty index chart pattern
For the sixth week in a row, the weekly bar chart pattern of Nifty touched a new high, and closed above 9650 for the first time in its history.
The index is trading well above its two rising weekly EMAs in 'blue sky' territory (i.e. with no known resistances).
Weekly technical indicators are inside their respective overbought zones. But three of them - ROC, RSI, Slow stochastic - continue to show negative divergences by failing to touch new highs with the index.
Nifty's TTM P/E is at 24.43 - slightly higher than last week, and well above its long-term average. However, the breadth indicator NSE TRIN (not shown) is rising towards its oversold zone - hinting at more index upside.
Bottomline? Bulls are in complete control of Sensex and Nifty charts, which are touching new highs every week. Both indices look overbought. Corporate earnings may take another couple of quarters before catching up with index valuations. Stay invested but maintain a trailing stop-loss.
If you are an overseas investor looking to invest in India's long-term economic growth story, links to a couple of recent articles in investopedia.com may be of interest.
(1) U.S. investors worried about the stamina of American stocks' bull run are finding new growth opportunities in emerging-markets stocks, according to The Wall Street Journal.
The MSCI Emerging Markets Index has surged 25% over the last year, far outpacing the Standard & Poor's 500 Index's roughly 15% return during that time. Emerging markets have been enjoying low volatility, which has drawn robust inflows.
Read more here.
(2) India exchange-traded funds (ETFs) are comprised of securities traded in India. This is an emerging market play, meaning it carries higher risk than more mature markets carry.
India’s economy is growing, but is not entirely stable and could be subject to volatility. The higher risk can mean higher returns, as each of the ETFs on our list shows. We have selected India ETFs that have the highest year-to-date returns of all India ETFs.
It is that time of the year when annual reports start arriving in mailboxes. With the stock market at a new high, it is becoming increasingly difficult to find stocks available at reasonable valuations.
All the more reason to take some time in going through annual reports in detail to find out which stocks to hold, which stocks to sell and which stocks to add more of.
The Price-to-earnings ratio (i.e. CMP/EPS) is commonly used to evaluate whether a company is fairly priced or over/under-valued. What the ratio doesn't reflect is whether earnings are growing or not.
The Price-to-earnings growth ratio (PEG = PE ratio/Annual EPS growth %) can provide a more realistic valuation metric.
Let us look at the ratios of two FMCG companies - HUL (MNC) and Marico (Indian):
HUL - EPS for FY17: 20.75; for FY16: 19.12; EPS Growth: 8.5%; P/E: 52.8;
Therefore, PEG = 52.8/8.5 = 6.2
Marico - EPS for FY17: 6.53; for FY16: 5.36; EPS Growth: 21.8%; P/E: 48.6;
Therefore, PEG = 48.6/21.8 = 2.2
The P/E ratios of both companies seem high. But Marico's PEG is much lower, making it a better value than HUL (at Jun 1 '17 closing prices).
Read more here.
For the month of May '17, FIIs were net sellers of equity worth Rs 4.5 Billion, which included today's net buying of equity worth Rs 10.5 Billion - as per provisional figures.
DII were net buyers of equity worth Rs 42.8 Billion, which included today's net selling worth Rs 9.4 Billion. Nifty gained more than 300 points (3.4%) for the month.
India's GDP growth in FY 2016-17 slowed down to a three year low of 7.1% against 7.9% (revised upwards to 8% due to revisions in IIP and WPI series) in FY 2015-16. Q4 (Mar '17) GDP growth fell to 6.1% against 7% in Q3 (Dec '16) - thanks to demonetisation.
The daily bar chart pattern of Nifty received good support from its 20 day EMA and bounced up strongly. It rallied past the 9600 level for the first time ever on May 26, and touched a new high of 9649.60 today.
All three EMAs are rising, and the index is trading above them in a bull market. However, daily technical indicators are looking overbought, and showing negative divergences by failing to touch new highs with the index.
The index is more than 800 points above its 200 day EMA - an empirical observation of an overbought condition that usually precedes a correction.
Nifty's TTM P/E ended the month at 24.35 - well above its long-term average - after rising to a high of 25.23 on May 17th. Decent earnings growth of Nifty component companies helped to moderate P/E growth.
(On a two years forward earnings estimate, Nifty's P/E is at a reasonable 15.5. But forward earnings estimate should be taken with a pinch of salt. It had to be revised downwards considerably for FY 2016-17.)
The breadth indicator NSE TRIN (not shown) has risen towards its oversold zone - giving an interesting contra-indication of more upside for the index.
So, will the index rally first and then correct? Or, will it correct first and then rally?
For small investors, guessing market movements is a waste of time and energy. Don't fight the trend - which is clearly up. Stay invested, but maintain a stop-loss.
WTI Crude Oil chart
The following comments appeared in the previous post on the daily bar chart pattern of WTI Crude Oil: "The rally may continue till 51-51.50. Expect bears to start selling at any time."
Oil's price rallied to touch a high of 52 on Thu. May 25 '17 but plummeted below all three EMAs to 48.50 with a huge volume spike - forming a large 'reversal day' bar (higher high, lower close).
On Fri. May 26, oil's price dropped a little lower, but bounced up to close exactly at its 50 day EMA - forming another 'reversal day' bar (lower low, higher close).
OPEC and non-OPEC producers agreed to extend current level of production cuts till Mar '18. The market was perhaps expecting additional cuts - or, it was a case of 'sell on news'. The reasons don't really matter.
Since the beginning of the year, oil's price has formed a bearish pattern of 'lower tops, lower bottoms'. Till that pattern gets reversed, expect bears to sell on every rise.
Daily technical indicators are looking neutral to bearish. MACD and RSI are in neutral zones, but not showing much upward momentum. Slow stochastic has dropped sharply from its overbought zone.
Huge oil inventories in USA and oversupply in the market is likely to keep prices depressed. Saudi Arabia is trying to 'balance' the market by cutting exports to USA.
On longer term weekly chart (not shown), oil's price formed a 'reversal bar' and closed well below its 200 week EMA in a long-term bear market. Weekly technical indicators are in neutral zones. Only Slow stochastic is showing some upward momentum.
Brent Crude Oil chart
The following comments appeared in the previous post on the daily bar chart pattern of Brent Crude Oil: "The rally may have further upside - to 53-53.50. But bears are likely to 'sell the rise' at any time."
Oil's price rallied past 54.50 intra-day on Wed. May 24, but dropped to close below 54. The next day, it again crossed above 54.50 intra-day, but plunged below its three EMAs to 51 on the back of a strong volume surge.
On Fri. May 26, oil's price bounced up to close at its 50 day EMA - and above its 20 day and 200 day EMAs in bull territory.
But the bearish pattern of 'lower tops, lower bottoms' since the beginning of the year is still in force. Bears are very much on top.
Daily technical indicators are not showing any upward momentum. MACD and RSI are at their respective neutral zones. Slow stochastic has fallen like a stone from its overbought zone.
Expect bears to continue their selling at every rise.
On longer term weekly chart (not shown), oil's price formed a 'reversal bar' and closed well below its sliding 200 week EMA in a long-term bear market. Weekly technical indicators are in neutral zones. Only Slow stochastic is showing some upward momentum.
