India, via the Bombay Stock Exchange, looks to be at an important juncture. The index is on the verge of breaking technical support at around 27,100 and forming a “Phase 3 Top” (see my book Sideways). Last week, it did break that support point, but managed to recover by Friday. This, by the way, is why I use a 3-bar rule before jumping to sell or buy upon a neckline break. Having said that, it does look like Bombay is holding a precarious line at this time. Let’s go over a few of the facts:
- February’s high of 30,000 has been taken out by a lower high. But the last trough low, established in March (which was a test of a prior support level and old resistance level) at 27,100 is holding.
- The 50 & (more importantly) the 200 day MA are broken—the weekly chart shows them as the 10 week and 40 week MA’s.
- The index is on the verge of experiencing a “death cross” (50 breaking down through the 200 MA). I don’t hang my hat on these events, but for what it’s worth, some people do, and it can lead to further selling pressure.
- Trendline (red line) is broken.
- RSI, Stochastics, MACD are heading down, no sign of hook to offer relief just yet.
- Comparative strength vs. the S&P500 (second pane from bottom) turned bearish in March. This despite the fact that the S&P500 itself has been flat (see my last blog on the triangular consolidation for the S&P500).
All in – I’ll be watching the Indian markets closely. There are enough negative signs to enforce one of our sell rules, should 27,100 break and stay below for a couple of weeks. We hold a small position in the BMO “ZID” ETF (half-weight in our equity model) and a full position in an individual Indian ADR. I will sell as, if, and when the market tells me to.
BTW: Our equity platform performance results for April were posted last week–click performance tab at the top of the page.
I’m into ZID as well, half a position. Are your thoughts to go to full position if $BSE has 3 positive days, or ride out the 1/2 position if the bump up continues? I agree with selling it below 27,100.
Are you thinking it rolled over because of the US/world results more than $BSE getting more expensive?
I always enjoy your postings and BNN visits. I have to go an look at the video you posted. Maybe you could start posting your thoughts on youtube? Explaining charts and your thoughts would be greatly appreciated by many of your audience!
Hi Daryn–thanks for the comments
Yes, the video should be on Youtube, and all will be posted there
I don’t plan on adding to ZID. But–I will continue to hold it if it acts properly! Craig and I have looked at India’s recent volatility–the market sold off Bombay when the Indian Gov’t announced foreign investment taxes, but the economy still looks encouraging despite this. Its not related to a world selloff so much.
In the end, all we care about is the trend on this one.
I like the new web look ( I know its been a while). Also like your video. In my opinion 7 mins per week is ideal.
Now thanks for your comments on MSFT after Jan results as your opinion gave me confidence to Hold & Apr results were good & I am happy. It would be nice if you blogged on transports ( US & CND) in general & cnr in particular (its been down from 88-76). I hold it for long term& I think you do too.
Finally, one reader had asked about where to find beta for stock/etf – most brokers give this, he/she might want to check with the broker. TIA
Hi Montazir–good to hear from you.
I don’t hold CNR any more. I will blog on the rails–good idea.
Good comment about beta being available at brokerage websites (discounters are best for that–full service, despite their name, are less service for that stuff I find)–beta is available with the TSX site as well.
For some reason when I submit a comment on your latest blog entry it’s giving me an error.
Got this one!