Ashika Monthly Insight August 2016

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AUGUST 2016 TECHNICAL OVERVIEW stage of 5th wave surpassing the previous high of 9119 and time wise correction with 13-month interval was crucial i.e. during April 2016 and if the correction does not get over in about 13 month then it can extend till 21 months. Inter-market analysis U.S Market: The Dow Jones industrials edged up close to all-time highs, as investors digested mixed earnings reports amid lowered expectations for global economic growth. The International Monetary Fund cut its global growth forecasts for the next two years, citing uncertainty over Britain’s looming exit from the European Union. The recently held Federal Reserve’s Federal Open Market Committee conference took note of the improved job scenario and decided not to risk raising rates. The language too was not hawkish and kept the option open in future meetings. On the technical front, as we had been mentioning that a bullish Ascending Triangle was in the formation stage since April 2016 and hence finally it provided the necessary breakout during the month. The said pattern has a bullish implication and projects an upside target till 19000 in medium term perspective. On the oscillator front though DJIA is fast approaching overbought region but it seems that the rally to extend further as rising channel line formation too projects the same. Nymex Crude: Oil prices settled at their lowest level in three months as the prospect of more oil-drilling activities in the U.S., a glut of petroleum-product supplies and an expected slowdown in refining activities renewed worries that inventories of crude will continue to outpace consumption. Oil prices seems to have peaked and the present downtrend is likely to continue based on several technical factors like that of `double top` formation in daily chart after peaking at around $50 mark followed by breach of rising trendline. Now the next important support level for the market exist around $39 which coincides with the previous swing low of August 2015 and also with the 50% retracement of the entire rise since February 2016. Lower crude oil prices would impact India’s inflation and current account deficit and is likely to benefit the Indian equity market in immediate term. 56
STRONG ON CONSUMPTION 10 Year Bond Yield India: Bond prices in India have been in an upward trend for the past few years, thanks to falling yields as the RBI cut rates and the broad macro economy improved. Bonds in India are rallying the most since September as revival in rains spurs optimism that better crop output will help contain food costs, which have a strong bearing on inflation. The RBI has injected Rs. 80,010 crore through open-market purchases on debt since April, boosting cash supply, while mounting speculation that a successor to governor Raghuram Rajan will be more aggressive in cutting interest rates has contributed to bond gains. The yield on the benchmark 10-year government bond has fallen from a peak of about 9 percent to 7.2 percent now. On the technical front bond yield had been in a severe downtrend since March 2016 onward and now heading towards it previous swing low of 7.11 percent Indian Rupee: The currency had been steady rising amidst the rising channel formation with its consecutive higher high formation in daily chart and probably heading higher towards 68-69. Elliot Wave study reveals that prices might be moving in a complex correction pattern (w-x-y-x-z) over the past two years and possibility arises that wave z where the currency is presently trading at is an extracting triangle. However on the short term perspective volatility is likely to prop in and failure to breach the support level of 66.50 would continue to maintain its uptrend. Though Indian rupee has shown remarkable stability in the last few trading sessions as important global events continued unabated, the latest being the all important British referendum to exit the European Union. In the near term, rupee will continue taking cues from shifts in global risk appetite as the top central banks are scheduled to hold policy meet. Positives: • • • • • • • Bullish ‘Head & Shoulder’ formation since September 2015 indicates Index to surpass the previous all time high of 9119 Bullish upward rising ‘Channel’ since March 2016 projects short term upside till 8750-8800 Immediate support for Nifty exists at 8400 according to band Bollinger. Nifty above all crucial averages with ‘Golden Crossover’ Medium term trend in the market continues to remain positive as long as Nifty stays above 8000 according to retracement principle. Bullish Ascending Triangle in DJIA projects further upside in Index till 19000. Double Top formation in Crude oil might drag the commodity till $39 Negatives: • • Swing high of July 2015 at 8654 acting as crucial resistance Elevated upward trendline since March 2016 indicates crucial support at 8250. • • •· Momentum loosing sheen according to oscillator as negative divergence can be seen. India VIX taking support from its historical low level. Uptrend in Rupee to remain due to rising channel formation To sum up Indian equity market shrugged off Brexit worries and extended its gain throughout the month. Hopes of good monsoon, clearance of GST bill in the parliament session majorly lead the recovery in the market. Further govt. approval of the seventh Central Pay 57
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Ashika Monthly Insight August 2016

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