Technicals for week ending – 5th August 2016.

Note : This is not a recommendation and I am not a registered analyst, these are just my observations and an assessment of the positives and negatives from a longer term point of view.

Nifty Weekly

On a longer term time-frame a lot of data sets still suggest to keep a bullish/positive stance on Nifty and Gold.

Observations (charts below):

On the weekly chart The Nifty index is still above its longer term supports and the weekly MACD buy signal is now 20 weeks old and counting, it can potentially run longer than the Modi election rally. The important thing is that the upside momentum can last longer even if we get a sell signal on the MACD. In the prior instances of such a long signal the Nifty has moved higher for few months even after a sell signal.

The Midcap, Smallcap, Broader Nifty500 & Auto Indices are in all time high territory. That’s a major positive for the bullish camp

On an inter-market approach, Metals, Realty & Auto index are the leaders and these are not defensive in nature – suggesting that we are still leaning towards the bullish side.

Every Sectoral and Broader index is now trading above its 40 week moving average, full scores on this parameter have resulted in strong uptrends in the past.

Across the sector indices, the average and median distance of the current close compared to the 52 week highest close shows a positive trend.

The Auto/FMCG ratio has broken out to the upside, I have put this up as a pinned tweet and you can see that past instances of a flat to uptrending ratio has been a positive environment for the market in general.

Banks have the highest weightage in the Nifty index and Bank Nifty is at the moment struggling around the 19k resistance – A break of that resistance would be a major positive.

FII net longs in index futures is at its highest level for the year. Below is a historical account and one can see that when they turn net long it has been a positive environment for the Nifty index.

Gold

The Goldbees ETF saw a strong move into the resistance zone and given that international gold prices corrected overnight, we will see the reaction on Monday. It will be important to see how we react near this zone in the coming weeks. A close below the 40 week MA would be reason to bail out of long term holdings.

The below chart is a comparison of the Gold Miners ETF vs. Gold prices. In previous instances a breakdown in the Miners ETF has led to correction in gold prices. Not seeing any breakdown in the Miners ETF as of now.

To conclude – the weight of the evidence still leans towards the bullish side with more positives. RISK to this would be the Nifty and Goldbees closing below their respective 40 week moving average. A close below that moving average and I will be out.