[Premium] October Monthly Charts Are Out!

November 1, 2018

I've just updated the Monthly Chartbook, and although October was a rough month for the equity market, our opinions really haven't changed all that much from last month in terms of trend and risk management levels. With that being said, I want to use this post to highlight a few things that stuck out to me.

First up is the Nifty 500, which we can see saw downside follow-through after last month's bearish reversal. For now this is a sideways trend where a neutral approach remains best.

Large-caps saw similar downside follow-through, shifting from an uptrend to a sideways trend. While it is holding support, it's tough to be bullish unless we're back above 11,220.

Small-caps and mid-caps finally saw a smaller monthly range and closed off the lows, suggesting that selling pressure has subsided in the short-term after September's sharp move lower. A move back above support this month would be constructive behavior, but for now the bias remains lower if we're below 6,245.

Bank Nifty is below our risk management level slightly, but continues to hold up relatively well after last month's downside reversal. Until we get back above 25,630, it's tough to be long here. As such, this remains a sideways trend where a neutral approach is best.

The action in Bank Nifty makes sense when you look at its individual components. HDFC Bank saw downside follow-through and closed under 2,000 this month, with a lot of room until its next major support level comes into play.

Meanwhile ICICI Bank made new monthly closing highs and looks to be attempting a breakout above 355.

IT finally saw some downside follow-through this month as it was the last leading sector to get hit. While it's still technically in a long-term uptrend, I'd expect some consolidation given the massive gains it's had over the last year or so.

Within the sector, Infosys hit our upside price target and continues to consolidate nicely. This is the type of action we like to see, correcting through time, rather than price.

The Nifty Fast Moving Consumer Goods Index saw downside follow-through after last month's breakdown through support. We closed off the lows, but we're back into this messy range for now, so a neutral approach is best.

Hindustan Unilever looks similar to the index in that it put in a failed breakout, but is holding up relatively well and consolidating below resistance to digest nearly 2 years of strong gains.

Other than that, I don't see much worth noting in the stock market. It's been more of the same this month besides the developments listed above. With that being said, there were some developments in the commodities' space.

First up, Base Metals continue to show weakness as leaders like Aluminum put in failed breakouts and close near the lows of the month.

Lead has been weak and continues to be, closing at 17-month lows. It looks vulnerable to more downside toward 102 if prices can't find their footing.

Nickel closed at the lows of the month and continues to grind lower after a failed breakout above 1,020 in June.

With Base Metals struggling to gain traction, I think it will be tough for Gold and Silver to get going. Gold continues to show relative strength, so we'll keep an eye out for another breakout attempt this month.

With that said, Silver continues to lag Gold significantly. This along with the weakness in Base Metals is signaling a lack of risk appetite in the metals space, which is why I think it'll be tough for leaders like Copper and Gold to move higher.

Crude Oil met our upside objective and reversed quickly, closing toward the lows of the month. Some sideways consolidation here would be healthy after a strong move higher these last 15 or so months.

The last thing to note is that long topping tails in GBPINR and EURINR. It's worth watching both this month as downside follow-through would suggest a more neutral approach is best as prices consolidate further through price or time.

USDINR and JPYINR remain in strong uptrends and did not see strong intra-month reversals to the downside like the other two did. There aren't many signs that indicate that these strong trends are going to stop anytime soon, but we'll be watching in the months ahead to see if we get any candles that signal indecision between supply and demand like we have in GBPINR and EURINR this month.