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India’s Sensex Index might be forming a major top reversal (Head & Shoulder Top) in the past two years. The length of the distribution period makes this pattern significant. 3 important technical levels showing strong resistance at 18,000 levels. These are; 200 day moving average, horizontal resistance (green line) and the downtrend channel. H&S pattern will be confirmed if the index breaks down the support at 15,700. RSI failing to move above 50 levels while the price found resistance at the 200 day moving average increased the possibility of a larger scale correction. Overall bearish outlook…

Weak Indian Rupee versus US Dollar does not bode well for the equities. INR is targeting 52 levels.

Symmetrical triangle is one of the common technical chart pattern that we see on almost every time frame on a price chart. It is easy to spot on a price chart and usually followed as a continuation pattern (consolidation before the trend resumes). The two charts above analyze similar symmetrical triangle patterns on Intel and Microsoft. Intel has breached above the upper boundary of the consolidation while Microsoft is still below the upper boundary. After these type of breakouts we would like to see price holding above the previously broken support/resistance level. Resistance should become support. In this case Intel should not fall below 23.60 level. If Intel holds above 23.60 in the next few weeks we will expect the price to reach 28 levels and Microsoft to follow the same pattern and breakout from the consolidation range. in the short-term both charts have neutral/positive technical outlook.

Markets have experienced sharp corrections in the past few months. After the weakness and major breakdowns there has clearly been technical damage on the price charts. Most important technical information is that almost all indices are now trading below their 200 day moving averages. Penetration below the 200 day moving average can be accepted as a short-term correction but if price stabilizes below the 200 day moving average this should raise a red flag and warn us of a possible change in medium-long term trend. Form the two MSCI indices above (MSCI All Countries World Index & MSCI Emerging Markets Index) we can say that price stabilized below the 200 day moving average in the past few months. 3 year-long uptrends are now damaged. However, we might be due for a rebound towards the 200 day moving averages. This could last for a few months. Positive divergence supports the case for a short-term rebound on the indices.

Gold’s strong uptrend has taken a parabolic shape. Price has climbed from $1,500 levels to $1,900 in the past few months. Gold is well above its 2008 high levels. What about gold stocks? Barrick Gold is one of the gold stock that is now testing its 2008 high level at 55. It has definitely lagged the Gold cash price performance but a breakout above 55 levels could push Barrick Gold higher with strong momentum. Horizontal resistance at 55 and upward sloping trend line forming support at 45 gives barrick gold a bullish outlook.