Monday, January 22, 2018

S&P 500 and FTSE 100 charts (Jan 19, 2018): bulls continue to rule

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: "It may be prudent to be fearful when everyone else seems greedy and take some profits off the table."

Quite a few investors did decide to be prudent, and booked profits. The index formed a large 'reversal day' bar (higher high, lower close) with strong volumes on Tue. Jan 16, when trading resumed after a long weekend.

Bulls refused to be deterred and bought the dip. After a brief halt on Thu. Jan 18, the index rose to another new high (2810) on Fri. Jan 19. All three EMAs are rising, and the index is trading above them in a bull market.

Daily technical indicators are well inside their respective overbought zones. Last week's trading has occurred within a bearish 'rising wedge' pattern - so caution is advised.

On longer term weekly chart (not shown), the index closed at another new high - way above its three rising weekly EMAs in a long-term bull market - but formed a bearish 'hanging man' candlestick pattern. Weekly technical indicators are looking very overbought. Don't be surprised if there is a sudden sharp correction. 

FTSE 100 index chart pattern


The following comments were made in last week's post on the daily bar chart pattern of FTSE 100: "Daily technical indicators are looking overbought and can trigger some consolidation or correction. Partial profit booking may be a good idea for conservative investors."

The index started correcting from Mon. Jan 15 and dropped below the 7700 level by Thu. Jan 18. Next day, the index bounced up after receiving support from its rising 20 day EMA, but lost 0.6% on a weekly closing basis.

At the time of writing this post, the index is trading 5 points higher, and above its three rising EMAs in a bull market. Daily technical indicators have corrected overbought conditions, but remain in bullish zones.

The correction provided an adding opportunity, and improved the technical 'health' of the chart. The index should move up to new highs.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly MACD and RSI are in bullish zones. Slow stochastic is moving down inside its overbought zone.

Sunday, January 21, 2018

Sunday musings: Lessons for small investors from Vishwamitra's dalliance with Menaka

Once upon a time, King Kaushika was touring his kingdom with a large army when he chanced upon the ashrama (hermitage) of Rishi (Sage) Vashishtha near a forest.

The Rishi greeted the King and offered his hospitality. Kaushika declined the offer because he thought it will be a great financial strain for Vashishtha to feed such a large army.

Vashishtha insisted and said it would not be a problem as he owned a wish-fulfilling (kamadhenu) cow, Sabala. Sure enough, Sabala arranged a grand feast which greatly pleased the King.

But a King won't be a King unless he coveted the possession of others. Kaushika felt that Sabala will be of more use to a King than a Sage. So, he offered ample monetary rewards to Vashishtha in exchange for Sabala.

The Sage politely refused the offer, which angered the King. He ordered his army to forcibly seize Sabala, at which point Sabala mournfully requested Vashishtha not to part with her.

Vashishtha suggested that Sabala raise an army of her own and defeat King Kaushika's soldiers - which she promptly did.

Kaushika decided to perform spiritual penance for 12 years. That pleased Lord Shiva, who granted him a wish. Being a King, who was humiliated by a humble Sage, Kaushika wanted the best weaponry that Lord Shiva could offer.

An emboldened Kaushika went on the attack and hurled his newly acquired divine weaponry at Vashishtha. But to no avail. Vashishtha's superior spiritual (yogic) powers repelled the attack easily.

Kaushika realised that physical powers were no match for spiritual powers. This time he went ahead with a more serious effort at penance to become the spiritual equal of Vashishtha.

In the process, he became Sage Vishwamitra. Lord Indra, King of Heaven, was disturbed by the severity of Vishwamitra's meditation and the yogic powers he might attain, and sent the beautiful apsara (celestial nymph) Menaka to seduce him.

Menaka did as she was instructed. Vishwamitra's spiritual resolve was overcome by the sheer beauty of Menaka. Their dalliance resulted in the birth of a daughter. 

Unfortunately, Menaka revealed to Vishwamitra the real reason why she had descended from Heaven. Vishwamitra was enraged by Lord Indra's devious move. He banished Menaka, abandoned their daughter and returned to his meditations.

[The daughter - named Shakuntala - was raised in Sage Kanva's hermitage. She later married King Dushyanta. Their child was called Bharata, after whom India was originally named.]

Moral of the story? There are two:

1. Thou shalt not covet others' possessions - which can be paraphrased as 'Keeping up with the Joneses'. It is a futile activity. Be happy with what you own. Greed isn't always good - particularly near a stock market top.
2. Dalliances should be avoided - regardless of the attractiveness of the opportunity.

The second moral is of particular importance to small investors. Remain steadfast in your discipline of maintaining a financial plan and following an asset allocation plan. Financial powers will follow inevitably albeit gradually.

Let not the Menaka's of the investment world - penny stocks, F&O trading, commodities trading, forex trading - lure you. Behind these Menaka's are the devious moves of the Lords (i.e. Professional Traders) of the stock/commodities/forex markets - designed to test your financial resolve.

Saturday, January 20, 2018

Sensex, Nifty charts (Jan 19, 2018): rising higher on the back of FII buying

FIIs have turned bulls again. (This post may explain why.) Their net buying in equities was worth Rs 42.3 Billion, as per provisional figures. DIIs were net sellers of equity worth Rs 7 Billion during the week, but were net buyers on Fri. Jan 19.

Sensex (35511) and Nifty (10895) closed the week at lifetime highs. Nifty crossed the 10900 level intra-week for the first time ever.

India's forex reserves rose by US $2.7 Billion to touch a lifetime high of $413.8 Billion in the week ending on Jan 12 '18.

BSE Sensex index chart pattern


The daily bar chart pattern of Sensex rose to touch new intra-day and closing highs on the back of strong buying by FIIs. DIIs joined the bull party on Wed. & Fri. (Jan 17 & 19), but were sellers on the other three days.

All three EMAs are rising, and the index is trading above them in a bull market. Sensex closed more than 3500 points above its 200 day EMA, and is looking quite overbought.

All four daily technical indicators are well inside their respective overbought zones. Slow stochastic is showing negative divergence by failing to move higher with the index.

The index looks ripe for a correction. If and when it occurs - it usually does when you least expect it - the technical 'health' of the chart will improve, enabling it to move higher.

Don't get too encouraged by India Inc. declaring good results for Q3 (Dec '17) because the growth is occurring from a lower base due to the adverse effect of demonetisation in Nov '16.

Look for companies declaring disappointing Q3 results. Those are the ones to trim from portfolios. Tata Steel has announced a large Rs 128 Billion rights issue in Feb '18, which will suck out a lot of cash from the secondary market.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty climbed to a new high on Fri. Jan 19 on the back of combined buying by FIIs and DIIs.

The index is trading well above its rising weekly EMAs in a bull market. Weekly technical indicators are inside their respective overbought zones. RSI and Slow stochastic are showing negative divergence by moving sideways.

Note the sliding volume bars during the past two weeks. That doesn't augur well for bulls. Don't sell in a panic. But some partial profit booking can be a good idea.

Nifty's TTM P/E has increased to 27.44 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is bouncing around inside its overbought zone, and can limit index upside

Bottomline? Sensex and Nifty charts have closed at new highs once again. Q3 (Dec '17) results of India Inc. are showing earnings improvement mainly due to lower base effect. Avoid aggressive buying at a market top.

(Note: Thinking of adding quality mid-cap and small-cap stocks to your portfolio? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers for 1 more day only - till Jan 21, 2018. Contact me at mobugobu@yahoo.com for details.)

Thursday, January 18, 2018

To know why FIIs are buying, look at the Dollex-30 chart

After five straight months of net selling in equity shares (from Aug '17 to Dec '17), FIIs have turned net buyers in Jan '18.

They have been net buyers in 10 of the 14 trading days this month. Today's net buying was worth Rs 18.9 Billion.

What made them change their bearish stance? Anticipation of better Q3 (Dec '17) results of India Inc.? Overbought US and UK stock markets?

May be a bit of both. For a technical reason, take a look at the long-term Dollex-30 monthly chart (courtesy:investing.com) below:



For the uninitiated, Dollex-30 is the BSE Sensex chart in US Dollar terms. The blue horizontal line has been used to mark the Jan '08 top, which acted as a resistance level in Dec '17.

While Sensex has been conquering new highs on a regular basis, the Dollex-30 has just managed to cross above its Jan '08 top after 10 long years.

Remember that when a long-term resistance level gets breached, it usually turns into a support level for future corrections.

Wednesday, January 17, 2018

Nifty chart: a midweek technical update (Jan 17, 2018)

During the first three days of trading this week, FIIs turned bulls once again. Their net buying in equities touched Rs 13.5 Billion. DIIs were net sellers of equity worth Rs 2.5 Billion, as per provisional figures.

WPI inflation was lower than anticipated at 3.6% in Dec '17 compared to 3.9% in Nov '17. Falling fruit and vegetable prices were main reasons for the lower number.

India's trade deficit was at its widest in 3 years in Dec '17, as a surge in gold and oil imports offset rising exports. Imports increased by 21.1% to $41.9 Billion. Exports increased 12.4% to $27 Billion. 


The daily bar chart pattern of Nifty had formed a 23 points upward 'GAP' on Jan 8. Some bullish and bearish technical possibilities were discussed in last week's post, with the scales tipping towards the bearish side.

Support from the 'GAP' was successfully tested twice last week - on Wed. Jan 10 and Fri. Jan 12. On Mon. Jan 15, the index opened with another upward 'gap' that was quickly filled during Tuesday's correction.

Bulls went on a rampage today. What changed the bearish outlook? News that the govt. will borrow an additional Rs 200 Billion this financial year (ending Mar '18) instead of Rs 500 Billion planned earlier may have acted as a catalyst.

FIIs and DIIs combined forces to buy equity shares today. However, the total number of advancing shares was matched by the total number of declining shares. That means bears are refusing to give up.

Nifty crossed the 10800 level intra-day for the first time ever, and is trading well above its three rising EMAs in a bull market. Daily technical indicators are in their overbought zones. MACD is showing upward momentum. Slow stochastic is showing negative divergence by touching lower tops as the index has moved higher.

Nifty's TTM P/E is at 27.18 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is falling rapidly inside its overbought zone - and can limit index upside. 

Hind. Unilever declared excellent Q3 (Dec '17) results after trading hours today. That may boost bullish fervour tomorrow.

(Note: Thinking of adding quality mid-cap and small-cap stocks to your portfolio? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers for 4 more days only - till Jan 21, 2018. Contact me at mobugobu@yahoo.com for details.)

Tuesday, January 16, 2018

WTI and Brent Crude Oil charts: soar up, up and away on increasing global demand

WTI Crude Oil chart


The daily bar chart pattern of WTI Crude Oil has continued its bullish fervour in the New Year. Draw down in US inventories and increasing global demand propelled oil's price to new highs. 

All three EMAs are rising, and oil's price is trading above them in a bull market. Increasing volumes have reinforced the bull rally.

Daily technical indicators are looking overbought. MACD and RSI are showing upward momentum, but Slow stochastic is moving sideways and showing negative divergence by not moving up with oil's price.

Some consolidation can be expected before the next leg of the rally. US rig count is increasing, and can put a cap on further rise in prices.

On longer term weekly chart (not shown), oil's price moved convincingly above its 200 week EMA and closed at a 3 year highWeekly technical indicators are looking overbought and may trigger a pullback towards the 200 week EMA.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil briefly touched the $70 level intra-day on Jan 11 - a level last seen in May '15 - before closing a tad lower.

All three EMAs are rising, and oil's price is trading above them in a bull market. The rally from the last week of Dec '17 has been accompanied by rising volumes, which augurs well for bulls.

Daily technical indicators are inside their overbought zones. While MACD and RSI are showing upward momentum, Slow stochastic is moving sideways and showing negative divergence by failing to move up with oil's price.

On longer term weekly chart (not shown), oil's price closed well above its 200 week EMA in long-term bull territoryWeekly technical indicators are looking overbought. Some correction or consolidation is possible.

Monday, January 15, 2018

S&P 500 and FTSE 100 charts (Jan 12, 2018): soaring skywards

S&P 500 index chart pattern


After a day's indecision on Tue. Jan 9 (by forming a 'doji' candlestick pattern) and the briefest of corrections on Wed. Jan 10, the daily bar chart pattern of S&P 500 rose to touch a new high (2788) on Fri. Jan 12.

All three EMAs are rising, and the index is trading way above them in a bull market. Daily technical indicators are well inside their overbought zones. Slow stochastic is showing negative divergence by failing to touch a new high with the index.

Note that an index can remain overbought for long periods. That doesn't mean one needs to jump in and buy. It may be prudent to be fearful when everyone else seems greedy and take some profits off the table.

On longer term weekly chart (not shown), the index closed at a new high - way above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking very overbought. Slow stochastic continues to show negative divergence by failing to rise higher. 

FTSE 100 index chart pattern


After a day's correction on Mon. Jan 8, the daily bar chart pattern of FTSE 100 soared to touch a new high (7792) on Fri. Jan 12. Bulls are buying at every dip.

All three EMAs are rising, and the index is trading above them in a bull market. Daily technical indicators are looking overbought and can trigger some consolidation or correction. (At the time of writing this post, FTSE is trading 5 points lower.)

Partial profit booking may be a good idea for conservative investors. Bravehearts can ride the bull wave with a trailing stop-loss.

On longer term weekly chart (not shown), the index touched a new high and closed above its three rising weekly EMAs in a long-term bull market. Weekly MACD and RSI are in bullish zones and showing upward momentum. Slow stochastic is looking quite overbought and can trigger a correction.