Long-term index trend & momentum: Technicals for week ending

Sunday, 15 May 2016

Technicals for week ending – 15th May 2016

Nifty Weekly

Still continue with the consolidation theme, and leaning to the bearish side TILL we do not close above 8k on the Nifty index & 17k on the Bank-Nifty index.

Observations (charts below):

On the daily chart it is clearly visible that the 8k zone on Nifty has been visited several times in the past and has acted as Support & Resistance. A break above 8k would be a positive but till then better to wait it out. Similar situation for the 17k zone on the Bank-Nifty.

The Nifty/Bond ratio chart is still below its declining 40 week moving average and we have a similar situation across the broader indices. Monsoon or no monsoon, don’t think it is going to be a dream bull run till we see improvement in those ratios and their respective 40 week MA’s start turning up!.

Most of the broader indices are trading above their respective 40 week moving averages but that is not the case with the sectoral indices. When both these reading have hit the full score we have seen start of major uptrends. Till that does not happen looks like we might just be in for a range-bound scenario with moderate gains over next few months.

On the VIX projected range chart we are treading close to the upper boundary and max high is around 8100 but with the addition seen in the 8k strike call option this looks unlikely to be breached in the short term (next 1-2 weeks).

Broader indices seem to be outperforming the Nifty index but when compared to the 10 Year bond index – the broader as well as sector ratios for majority indices are below their respective 40 week MA’s. (Refer Weekly Relative Strength Charts).

To conclude – the weight of the evidence still suggests a stance to the neutral to bearish side over next few months, while the most important point to look for will be if we can breakout and sustain above 8k on the Nifty and 17k on the Bank-Nifty.

Nifty Daily chart :