Rounding Top Pattern in the Indian Stock Market Nifty Index Suggests Lower levels for the Nifty in the Months Ahead

The weekly chart of the Indian stock market Nifty index shows a rounding top formation that targets 6000 on the Index. This coincides with a rounding bottom that is forming on the weekly chart in the India Vix which is a measure of Indian stock market volatility suggesting an upsurge in volatility in the upcoming months. The pattern suggests a level of 35 for the India #Vix up over 50% from current levels. This implies significant downside for the Nifty in the upcoming months.
Incidentally the India Vix has traded below the US Vix recently and a catch up to the upside is likely as the India Vix tends to be significantly higher than the US Vix.

Rounding Bottom in India Vix Implies Downside Ahead http://t.co/Hj1JzDT8y4 pic.twitter.com/8TL5CvoTrT

— samuelR (@RajveerRawlin) September 6, 2015

Current Stock Market Outlook

The S and P 500 seems to have put in a major top near the 2135 mark. After violating it's 200 DMA near 2074 it has broken down again below the 50 DMA near 2040 to about 1880 near last years lows. The summation index after a big move down is in negative territory suggesting market internals are deteriorating. No new highs in the summation index in over 2 years suggests an eventual break down in the market. Major support for the market is now near 1875. Resistance is close to 1920. Outlook is bearish midterm but we could see a short term oversold bounce.


Transports are under performing down near multi year lows this week. The #DOW transports are continuing to under perform the broader market over the last 9 months and bearish divergences in the transports are now spreading to the rest of the market. No new highs in the transports for over 9 months now, a major DOW theory non conformation which implies more downside in the market soon:


The #Vix is headed up and has held support near the 12 mark several times and has now briefly crossed the 25 mark. Still no new lows for the Vix in over a year and a major push upwards is under way and will continue post an oversold bounce in the market. As more time elapses the Vix is looking increasingly bullish which is bad for the market:

#Oil  has broken down significantly lower below the 35 level. Further downside looks likely after any oversold bounces up to the 35 level.


The #Euro appears to be gearing for a bounce above the 1.09 level. The Euro is expected to come under more pressure following this with the 1.10 level acting as immediate resistance following a broad reduction in global risk appetite:

Indian markets have completed oversold bounces from lower levels but  weakness in the Rupee
and surging Indian market volatility are concerns going forward and relative under performance appears to be on the cards. The #Nifty has made fresh lows below the 7600 level. The 8000 level is strong resistance now and support is seen only near 7400 on this break lower:


Taken together the above indicators suggest that following any oversold bounces, markets are susceptible to sudden bouts of volatility and downside in the upcoming months as problems in the US junk bond market and China will remain in the backdrop with bearish divergences continuing to pile up.

Market Views for the Day http://t.co/SpkfrglNYQ pic.twitter.com/OywA9FVZeo

— samuelR (@RajveerRawlin) September 3, 2015

Stock Market Signals for the US and Indian Stock Markets for the Upcoming Week beginning May11

Indicator	Weekly Level / Change / Significance	Implication for S & P 500	Implication for Nifty*
S & P 500	2116, 0.40%	Neutral**	Neutral
Nifty	8192, 0.10%	Neutral	Neutral
China Shanghai Index	4206, -5.3%	Bearish	Bearish
Gold	1187, 0.90%	Bullish	Bullish
WTIC Crude	59.5, 0.40%	Neutral	Neutral
Copper	2.91, -0.90%	Bearish	Bearish
Baltic Dry Index	574, -2.20%	Bearish	Bearish
Euro	1.120, 0.10%	Neutral	Neutral
Dollar/Yen	119.76, -0.3%	Neutral	Neutral
Dow Transports	8767, 0.30%	Neutral	Neutral
Nyse Summation Index	306, -37%	Bearish	Bearish
US Vix	12.86, 1.30%	Bearish	Bearish
20 DMA, S and P 500	2102, Above	Bullish	Neutral
50 DMA, S and P 500	2089, Above	Bullish	Neutral
200 DMA, S and P 500	2030, Above	Bullish	Neutral
20 DMA, Nifty	8417, Below	Neutral	Bearish
50 DMA, Nifty	8574, Below	Neutral	Bearish
200 DMA, Nifty	8271, Below	Neutral	Bearish
India Vix	19.11, 11%	Neutral	Bearish
Dollar/Rupee	63.75, 0.1%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	4	1
Bearish Indications	5	9
Outlook	Marginally Bearish	Bearish
Observation	The Sand P 500 is at the top of its trading range while the Nifty is at the lower end of its range. The summation index is still flashing warning signs.
On the Horizon	Greece, Italy and German GDP, US PPI and retail sales
*Nifty	India’s Benchmark Stock Index
Raw Data	Courtesy Google finance, Stock charts
**Neutral	Changes less than 0.5% are considered neutral

I have added three new indicators this week, the Chinese stock market index, the India Vix and the Dollar/Rupee rate.