Stock Index Chart Patterns – S&P 500 and FTSE 100 – Mar 2, ‘12

S&P 500 Index Chart

The inevitable happened. The bulls finally managed to push the S&P 500 index chart to new 52 week highs – both on intra-day and closing basis. The index touched an intra-day high of 1378 on Feb 29 ‘12 and a closing high of 1374 on Mar 1 ‘12. Is it time for celebration or caution?

All three EMAs are rising and the index is trading above them. The bulls appear to be in complete control. But there are a few concerns. The index is trading too far above its 200 day EMA, which is a precursor to a correction. Despite a spike up on Feb 29, volumes have been sliding. A bull rally needs volume support to sustain.

The technical indicators are bullish, but continue to show negative divergences. The slow stochastic is inside its overbought zone, but drifting down. The MACD is positive and touching its signal line, but slowly losing ground. The RSI is above its 50% level, but making a bearish pattern of lower tops and lower bottoms. The ROC is barely positive, but touching lower tops. Stay invested with a trailing stop-loss.

Is the slow-growing US economy reaching stall speed? Some of the data points suggest as much. Weekly unemployment claims remained flat at 351,000. ISM Manufacturing index declined to 52.4 from 54.1 in Jan. Durable goods orders declined by 4% in Jan after 3 straight monthly increases. Home prices continued to fall. But it wasn’t all bad news. Car sales crossed the 15 Million mark in Feb – a 4 yr high. Sales of previously owned homes rose 4.3% in Jan – helped by the lower prices.

FTSE 100 Index Chart

The FTSE 100 chart closed marginally lower for the week. The bull rally appears to have hit a road-block below the 6000 level. The index is still trading above all three EMAs, so the bull rally is under no immediate threat. However, a correction seems to be around the corner.

The technical indicators have weakened further, and are on the verge of turning bearish. The slow stochastic has dropped from the overbought zone, but remains above the 50% level. The MACD is positive, but has slipped below the falling signal line. The RSI is resting at the 50% level. The ROC is at the ‘0’ line, after a brief dip into negative territory. A correction down to the 5800 level can be used as a buying opportunity. A deeper correction may put the nascent bull market in jeopardy.

Spectre of a double-dip recession in the UK may be fading. PMI for construction increased to 54.3 from 51.4 in Jan. PMI for services dropped to 53.8 from 56 in Jan. Remember that a figure above 50 means expansion. The big problem remains unemployment, which is at a 17 yr high. Austerity measures are not helping in job creation. High oil prices are another concern.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are in bull markets, which have climbed higher in spite of negligible growth in the underlying economies. Easy availability of liquidity has helped in propelling the markets. At some point, the weak fundamentals may drag the markets down. Till then, stay invested with trailing stop-losses.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Feb 24, ‘12

S&P 500 Index Chart

The chart pattern of the S&P 500 index reminded me of an old Cole Porter song: “So near and yet so far.” The index touched an intra-day high of 1369 on Fri. Feb 24 ‘12 and closed marginally higher on a weekly basis, but couldn’t quite cross above the May ‘11 top of 1371. Will the index touch a new 52 week high this week?

The possibility is high. The index is trading above all three of its rising EMAs, and is in a bull market. But volumes are decreasing and the technical indicators continue to show negative divergences, by failing to reach new highs. The index may pause to catch its breath after rising almost non-stop for two months.

Despite large doses of QE1, QE2 and an indirect QE3, growth in the US economy is still tepid. Initial jobless claims were almost flat at 351,000. New hiring isn’t picking up. Inventory of existing homes reduced as existing home sales rose. As per AAII’s Sentiment Survey, bullish sentiment rose by 1% to 43.7% (above its historical average of 39%) and bearish sentiment rose by 0.9% to 27.5% (below its historical average of 30%). The fly in the ointment was ECRI’s reaffirmation of a recession by mid-2012.

FTSE 100 Index Chart

The FTSE 100 index chart closed with a higher weekly gain, but the bulls seem to be getting tired as the index nears the 6000 level. All three EMAs are rising with the index trading above them, which indicates a bull market.

The technical indicators are not bearish, but showing some weakness. The slow stochastic is inside its overbought zone, but sliding down. The MACD is positive and touching its signal line, but drifting downwards. The RSI has fallen sharply after touching the edge of its overbought zone, but remains above the 50% level. The ROC dropped to the ‘0’ line, but has bounced up.

The UK economy is teetering at the brink of another recession. The GDP contracted by 0.2% during the last three months of 2011, in spite of a 0.5% increase in household spending and 1% growth in government spending. The full year GDP was revised down to 0.8%.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are in bull markets – even though the GDP growths in the US and UK economies are negligible. Are the stock markets telling us that things will improve later in the year – or is it just that markets are being propelled by easy availability of low-cost money? Who knows, and why bother? Just ride the up trends by maintaining a stop-loss at the levels of the respective 20 day EMAs. Use dips to add.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Feb 17, ‘12

S&P 500 Index Chart

The following observation was made in last week’s analysis of the S&P 500 index chart pattern: “A correction down to the rising 20 day EMA may be just the impetus that the bulls need to take the index past the May ‘11 top of 1371.” There was no correction – just a sideways consolidation. But the index rose to an intra-day top of 1363, within hand-shaking distance of the May ‘11 top of 1371. The bears have been all but vanquished.

Low volumes as the index rose to a new high, as well as negative divergences in all four technical indicators – which failed to reach new highs with the index - may be the trigger for a correction this week. That doesn’t mean one should short a bull market. All three EMAs are rising and the index is trading above them.

The technical indicators are looking bullish. Only the slow stochastic is looking overbought, but it can remain so for long periods. The MACD has slipped a bit, but is still positive and touching its signal line. The RSI is rising towards its overbought zone. The ROC is positive, but moving sideways.

The US economy continues to improve slowly. Initial weekly unemployment claims dropped to 348,000, its lowest level in almost 4 years. Retail sales increased by 0.4% in Jan. YoY changes in housing starts was positive for the 5th month in a row. Industrial production was marginally higher. All talk about recession is now off the table.

FTSE 100 Index Chart

The FTSE 100 index traded sideways during the past week. Despite an intra-day drop to its rising 20 day EMA on Thu. Feb 16 ‘12, the index managed to close about 50 points higher on a weekly basis. All three EMAs are rising and the index is trading above them – indicating a bull market.

The technical indicators are bullish. The slow stochastic is inside its overbought zone. The MACD is positive, and touching its signal line. The RSI has climbed sharply towards its overbought zone. The ROC is positive, but moving down.

There was some good news on the economic front. CPI dropped to 3.6% in Jan. from 4.2% in Dec. Retail spending rose a surprising 0.9% in Jan. - raising hopes of avoiding a double-dip recession. However, Eurozone GDP declined by 0.3% in Q4 ‘11. Even Germany’s growth shrank and increased prospects of a recession that will dent UK’s exports to the EU.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are in bull markets. Stay invested with trailing stop-losses, and use dips to add.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Feb 10, ‘12

S&P 500 Index Chart

The following observations were made in last week’s analysis of the S&P 500 index chart pattern: “The technical indicators are looking overbought and showing negative divergences. The index can remain overbought for long periods, but the negative divergences in all four indicators hint at a correction.” The index kept inching up through most of last week, till some selling on Fri. Feb 10 ‘12 caused a slightly lower weekly close.

The technical indicators are bullish, but showing signs of weakness. The slow stochastic is inside its overbought zone, but has slipped down a bit. The MACD is positive and just above its signal line. The RSI has dropped from its overbought zone, and is moving down. The ROC is positive but not really going anywhere. All three EMAs are rising with the index trading above them – so there is no threat to the bull market. A correction down to the rising 20 day EMA may be just the impetus that the bulls need to take the index past the May ‘11 top of 1371.

The US economy continues on its slow path to recovery. Initial weekly jobless claims fell to 358,000. ISM manufacturing index rose to 54.1 in Jan ‘12 from 53.1 in Dec ‘11 (a reading above 50 means expansion). Bullish sentiment rose to 51.6% (from 43.8%) while bearish sentiment fell to 20.2% (from 25.1%) in AAII’s sentiment survey. However, the Reuters/Univ. of Michigan Consumer Sentiment index slipped a little to 72.5 (from 75 in Jan ‘12).

FTSE 100 Index Chart

The FTSE 100 index chart closed lower for the week due to profit booking on Fri. Feb 10 ‘12, after spending most of the week trading sideways. All three EMAs are rising with the index trading above them – a sign of a bull market.

The technical indicators are indicating bullishness, but not as much as a week ago. The slow stochastic is in its overbought zone, but moving down. The MACD has slipped a bit, but remains above the signal line in positive zone. The RSI is above the 50% level, but falling. The ROC is positive but drifting sideways.

UK’s manufacturing output rose by 1%, somewhat easing recession fears. But unemployment is rising and more job cuts are planned, as per this article. Inflation dropped to 4.1% in Jan ‘12 from 4.8% in Dec ‘11. Worries about a flagging economy forced the Bank of England to inject another 50 Billion sterling in its QE programme.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are back in bull markets – thanks more to easy availability of liquidity rather than any real strength in the respective economies. But as Tennyson wrote in a completely different context: “…Theirs not to reason why…”. Use dips to add, but maintain a trailing stop-loss to ensure that you don’t ride into the valley of death.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Feb 03, ‘12

S&P 500 Index Chart

The S&P 500 index chart continued its upward march, after a brief dip to its rising 20 day EMA. All three EMAs are rising and the index is trading above them – the sign of a bull market. The May ‘11 top of 1371 is the next big hurdle on the way, but looks like the bulls will leap over it with ease.

The technical indicators are looking overbought and showing negative divergences. The index can remain overbought for long periods, but the negative divergences in all four indicators hint at a correction. The slow stochastic has re-entered its overbought zone, but touched a lower top while the index moved higher. The MACD is positive and hanging on to its signal line without rising or falling. The RSI has also re-entered its overbought zone, but touched a lower top. The ROC is positive but drifting downwards.

Last week’s jobs report was hailed by the stock market as an indication that growth in the US economy is slowly getting back on track, but all may not be well. Initial jobless claims dropped to 367,000; non-farm payrolls increased by 243,000 – much higher than consensus estimates; the unemployment rate fell to 8.3% from 8.5%. That was the good news. The bad news is that labour force participation dropped to a 30 years low at 63.7%. AAII sentiment survey showed a 4.6% drop in bullish sentiment to 43.8% (still above its historical average of 39%), and bearish sentiment rose by 6.2% to 25.1% (below its historical average of 30%).

FTSE 100 Index Chart

The FTSE 100 chart has re-entered a bull market, after a short correction down to its rising 20 day EMA. The index closed at its highest level since Jul ‘11, but all four technical indicators are showing negative divergences by failing to reach higher tops. Another correction may be around the corner.

The technical indicators are looking bullish. The slow stochastic has climbed into its overbought zone after a sharp drop from a head-and-shoulders pattern. The MACD is positive and just above its signal line. The RSI bounced up from its 50% level, and rising towards its overbought zone. The ROC took support at its ‘0’ line and is moving up in positive territory.

UK’s manufacturing and services sectors enjoyed a decent start to 2012. The manufacturing PMI survey reading rose to 52.1 in Jan ‘12 from 49.7 in Dec ‘11, indicating a return to expansion. The services sector PMI rose to 56 in Jan ‘12 from 54 in Dec ‘11. A recession may be avoided if this rate of expansion persists, since the services sector forms 2/3rds of the UK economy. The bad news came from the Eurozone, where manufacturing PMI was at 48.8 in Jan ‘12 – up from 46.9 in Dec ‘11. A figure below 50 is a sign of contraction. Small and medium businesses in the UK are facing tough times, as bank lending is at its lowest level since 2009. Another dose of QE may be in the offing.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are back in bull markets – discounting the slow and tortuous growth in the US and UK economies. Bull rallies in both indices have been quite sharp. Likely corrections will restore the energy of the bulls. Use dips to add.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Jan 27, ‘12

S&P 500 Index Chart

The S&P 500 index chart touched an intra-day high of 1333 on Jan 26 ‘12 but closed lower than the previous day’s close – forming a bearish ‘reversal day’ pattern. Reversal day patterns, when formed at the end of an intermediate rally or decline, can signal a change of the intermediate trend. The index had moved up too fast, and a correction will restore the health of the bull market.

The technical indicators are signalling that a correction may be on its way – though the weekly close was flat. The slow stochastic is still inside the overbought zone, but has started to fall. The MACD is positive and above its signal line, but has also started to fall. The RSI formed a small head-and-shoulders pattern before dropping from its overbought zone. The ROC is positive, but heading down.

The US economy reminds me of a badly tuned automobile that is knocking and backfiring but still moving forward. Initial jobless claims rose to 377,000. New home sales dropped in Dec ‘11. But durable goods orders rose in Dec ‘11. AAII’s sentiment survey indicated bullishness at 48.4% was higher than its historical average of 39%; bearishness at 18.9% was much below the historical average of 30%. Q4 GDP came in at an annualised 2.8%, of which inventory build-up accounted for 1.9%. Q1 ‘12 GDP may suffer as a consequence.

FTSE 100 Index Chart

The FTSE 100 index chart has followed the S&P 500 index into a bull market by rising to an intra-day high above the 5800 level and making a bullish pattern of higher tops and higher bottoms, but closed flat on a weekly basis. Volumes dropped off during the week, which doesn’t auger well for a sustained rally.

The technical indicators are signalling a correction. The slow stochastic has made a head-and-shoulders pattern and slipped down from its overbought zone. The MACD is positive and touching its signal line on the way down. The RSI is above the 50% level but moving down. The ROC is falling towards the ‘0’ line.

Britain moved closer to its second recession in three years after official figures showed the UK economy contracted by more than expected in the last three months of 2011. Eurozone problems are not going away, and are affecting UK’s growth prospects.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are technically back in bull markets, even as the US and UK economies continue on their painful roads to recovery. The rallies appear to be on their last legs. Corrections are around the corner - use them to add selectively.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Jan 20, ‘12

S&P 500 Index Chart

There was no stopping the bulls as the S&P 500 index chart comfortably scaled the 1300 level, and maintained its bullish pattern of higher tops and higher bottoms. All three EMAs are rising, and the index is trading above them. The bulls are back in the drivers seat.

The technical indicators are reflecting the bullish condition. The slow stochastic is deep within its overbought zone, where it can stay for a long time. The MACD is above its signal line and rising. The RSI is in its overbought zone. The ROC is positive but sliding.

The index has risen too sharply this month, and there are negative divergences visible in the MACD (lower top) and ROC (series of lower tops). A correction may be round the corner - which should be welcomed by the bulls. It would restore the health of the nascent bull market and provide an entry point.

The US economy continues to flash mixed signals, as it slowly gets out of a downturn. Industrial production increased by 0.4% in Dec ‘11. Last week’s initial unemployment claims came in much lower at 352,000. NAHB’s Housing Market Index rose to 25 – still low but the highest since mid-2007. Core inflation is decreasing but service sector inflation is increasing – so a deflation is unlikely. Rail traffic dropped sharply in Jan ‘12. The Baltic Dry Index has dropped by more than 50% in the last three months – close to the lows of 2009. That means, global trade is slowing down.

FTSE 100 Index Chart

The FTSE 100 index chart defied gravity and continued its bull rally last week. The index just about managed to get past its Oct ‘11 top, and formed a bullish pattern of higher tops and higher bottoms. The imminent ‘golden cross’ of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market.

The technical indicators are bullish, but showing signs of weakness. The slow stochastic is inside its overbought zone. The MACD is positive and above its signal line, but has stopped rising. The RSI is above its 50% level but sliding down. The ROC is barely positive, and touched a lower top as the index rose higher.

The UK economy is lagging behind the stock market. But there was some good news. Inflation fell to 4.2% in Dec ‘11 from 4.8% in Nov ‘11. This may pave the way for expansion of Bank of England’s Quantitative Easing programme. Luxury car manufacturers like Bentley, Jaguar and Land Rover (no longer British-owned brands) can help the country’s GDP growth, thanks to the healthy demand from China.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are back in bull markets, even as the US and UK economies continue to stumble on their way to recovery. This looks like a rally driven more by liquidity than by fundamental strength. Be prepared for sharp corrections, but use them to add. Looks like the world may not come to an end after all.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Jan 13, ‘12

S&P 500 Index Chart

In analysing the chart pattern of the S&P 500 last week, it was mentioned that the bulls had a little more clean up work left before the bears could finally be sent into hibernation. That work has been successfully completed. The index has moved past its Oct ‘11 intra-day high of 1293, forming a bullish pattern of higher tops and higher bottoms; and, the 50 day EMA has convincingly crossed above the 200 day EMA (the ‘golden cross’) confirming a return to a bull market.

Is it time to crack open the champagne? May be not just yet. The index has been trading within a bearish ‘rising wedge’ pattern since touching its Nov ‘11 low. Volumes tapered off during the week’s trading. The slow stochastic is trying to correct the overbought condition. The RSI is already heading down from its overbought zone. The ROC is sliding towards the ‘0’ line. The MACD is positive and above its signal line, but has stopped rising. Expect some correction or consolidation in the current week. Use the likely dip to add, but don’t forget to use a tight stop-loss.

The US economy continues its painfully slow growth, taking half a step back for every step forward. The Reuters/Univ. of Michigan Consumer Sentiment index rose, but ECRI’s WLI index dropped (indicating a weaker economy 6 months down the road). Retail sales in Dec ‘11 rose a meagre 0.1% month-on-month, but a  more respectable 6.5% year-on-year. Weekly initial unemployment claims rose to 399,000. Rail traffic for the week ending Jan 7 ‘12 was down 3.7% compared to the same week in 2011. Not the kind of data that supports a full-fledged bull market.

FTSE 100 Index Chart

The FTSE 100 index chart is trying to follow the S&P 500 into a bull market, but is facing some technical headwinds. The 20 day EMA has crossed above the 200 day EMA. The 50 day EMA is trying to do likewise. The index has not yet gone past its Oct ‘11 top. Instead, it is consolidating within a small rectangular ‘flag’ pattern from which it could break out in either direction. The spike in volumes on the last two days of the week is a concern, because the FTSE closed lower on those two days.

The technical indicators are hinting at a correction. The slow stochastic is turning down at the edge of its overbought zone. The MACD is positive and above its signal line, but has started falling. The RSI is moving sideways below its overbought zone. The ROC is positive, but falling sharply. The index has been trading within a bearish ‘rising wedge’ pattern since touching its Nov ‘11 low.

There was some good news for the UK economy. Inflation dropped to 4.8% in Nov ‘11 from 5% in Oct ‘11, and is expected to fall further. That may be a prelude to a dose of Quantitative Easing. But Eurozone problems are affecting exports and can push the economy into a recession. Unemployment remains quite high.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are climbing back into bull markets amid concerns of slow growth and recession. Bull markets are supposed to climb over a wall of worries. That doesn’t mean one has to be gung-ho bullish. Stay circumspect, and accumulate fundamentally strong stocks slowly.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Jan 06, ‘12

S&P 500 Index Chart

In last week’s analysis of the S&P 500 index chart pattern, the technical indicators were looking bullish and the 20 day EMA had crossed above the 200 day EMA. The 50 day EMA has just crossed above the 200 day EMA – for the first time since Aug ‘11 – but the cross hasn’t been a convincing one yet. The ‘golden cross’ (of the 50 day EMA above the 200 day EMA) confirms a return to a bull market.

A little more work remains to be done by the bulls. The Oct ‘11 intra-day top of 1293 has to be surpassed to form a bullish pattern of higher tops and higher bottoms. There are a couple of technical concerns. Volumes have not been that great. The technical indicators are showing some signs of being overbought.

The slow stochastic is inside the overbought zone. The RSI is about to enter its overbought zone. The MACD is positive and rising above its signal line. The ROC is rising in positive territory. These are bullish signals. But there is a tendency to hesitate near a previous top (or bottom).

The US economy is returning to the growth path – albeit slowly. Initial unemployment claims came in lower at 372,000. Non-farm private sector employment rose to 325,000 in Dec ‘11 from 204,000 in Nov ‘11. Part of the rise can be attributed to holiday season part-time hires. The Jan ‘12 employment figures will reveal the true picture. AAII’s survey of individual investors showed bullish sentiment at an 11 month high of 48.9%, and bearish sentiment at a year low of 17.2%.

FTSE 100 Index Chart

The FTSE 100 index chart is trying to follow in the footsteps of the S&P 500 index by trading above its 200 day EMA – but is a few steps behind. Note that both the 20 day EMA and 50 day EMA are still below the 200 day EMA, though the 20 day EMA may cross above the long-term moving average soon.

Volumes are on the lower side, which puts a question mark on the sustainability of the current rally. The Oct ‘11 intra-day high of 5747 needs to be crossed. The technical indicators are showing signs of weakness. The slow stochastic is at the edge of its overbought zone, and moving sideways. The RSI is dropping towards its 50% level. The MACD, which is a lagging indicator, is rising above its signal line in positive territory. The ROC is also positive, but its upward move has stalled.

The UK economy continues to lag the bullish stock index. Retail sales during the recent holiday season were not up to the mark. This could lead to more job losses as businesses downsize to survive. Stronger-than-expected growth in the dominant services sector last month may have saved the UK economy from contraction in the final quarter of 2011, as per this article. The December PMI figure was 49.6, up from the 47.7 recorded in November, but still below the 50 mark that signals growth.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices appear poised to return to bull markets, despite the sluggish growth (or, lack of it) in the US and UK economies. However, every silver lining has a dark cloud. Both indices appear to be forming bearish ‘rising wedge’ patterns from their Nov ‘11 lows, which could lead to downward breaks and retreats back to bear markets. So, caution is advised till the Oct ‘11 tops are convincingly surpassed.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Dec 30, ‘11

S&P 500 Index Chart

In the technical analysis of the S&P 500 index chart last week, it was mentioned that the technical indicators were looking bullish but showing signs of fatigue – due to negative divergences in the technical indicators and low volumes.

The index touched the highest levels of the month on Dec 27 ‘11 – both on intra-day and closing basis – by the narrowest of margins and accompanied by the lowest volumes in a holiday-shortened week. The weekly close was a bit lower; the monthly close was slightly higher; but the yearly close was absolutely flat.

All the technical indicators are showing bullishness. The 20 day EMA has crossed above the 200 day EMA. The 50 day EMA is about to follow suit. The slow stochastic is at the edge of its overbought zone. The MACD has started to rise above the signal line in positive territory. The RSI has moved above the 50% level. The ROC is in the positive zone. The low volumes are a concern for the bulls. Till the Oct ‘11 top of 1293 is overcome, the bears will remain in the game.

The US economy continues to grow ever so slowly, with most indicators showing mild growth. Q3 GDP grew 1.8% vs. 1.3% in Q2. Manufacturing PMI rose to 52.7 in Nov from 50.8 in Oct. Conference Board’s LEI index is looking bullish, but ECRI’s WLI index is bearish. Housing is unlikely to lead the economic recovery, with prices still falling, foreclosures rising and new home sales at multi-decade lows. Initial unemployment claims rose to 381,000. As long as inflation and interest rates remain low, the S&P 500 may thrive.

FTSE 100 Index Chart

The FTSE 100 index chart managed to close above the 200 day EMA in 3 days of trading in a holiday-shortened final week of the year, but on progressively lower volumes. The 20 day and 50 day EMAs are trading well below the 200 day EMA – so the bulls still have plenty of work to do.

The technical indicators are beginning to turn bullish. The slow stochastic is above the 50% level. The MACD is starting to rise above its signal line in positive territory. The RSI has just managed to edge above the 50% level. The ROC has climbed into the positive zone. For the rally to sustain, more volume support is required.

The UK economy is slowing down and facing strong headwinds with falling real incomes coupled with austerity measures and the debt crisis in the Eurozone leading to lower UK exports. The prospect of a recession is looming large. The only bit of good news is that inflation may come down.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices continued their Santa Claus rallies on weak volumes. That puts question marks on the sustainability of the rallies in the new year. Both indices are indicating that the worst may be over for the respective economies. The trends have been up since touching the Oct ‘11 lows. Till the Oct ‘11 tops are crossed, one can remain cautiously optimistic.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Dec 23, ‘11

S&P 500 Index Chart

In last week’s analysis, contradictory signals from the technical indicators of the S&P 500 index chart had signalled a week of consolidation before Christmas. Instead, the index took investors for a roller-coaster ride – closing at its lowest level for the month on Mon. Dec 19 ‘11 and then rallying above all three EMAs to its highest closing of the month on Fri. Dec 23 ‘11. A bullish pattern of higher tops and higher bottoms will get formed if the index manages to move above its Oct ‘11 top of 1293. Will it be able to do so?

The technical indicators are looking bullish, but there are signs of fatigue. The slow stochastic, which was falling towards its 50% level last week, turned around smartly and is about to enter its overbought zone. The MACD has climbed up above its signal line in positive territory. The RSI, which was rising above its 50% level last week, dropped below its mid-point before inching back above it. The ROC had dropped into the negative zone last week, but turned around to just about enter its positive zone.

Note that all four technical indicators are showing negative divergences. The S&P 500 closed at its highest level for the month and was just 2 points short of its intra-day high for the month, but the technical indicators reached much lower tops. Another concern for the bulls is the progressively lower volumes as the index rose higher – with Friday’s volume being the lowest of the month. It is difficult to sustain a rally with low volume support.

US economic news and indicators are still providing mixed signals. Q3 GDP growth estimate was revised down to 1.8%. There is hope that Q4 GDP growth will show improvement. Weekly rail traffic grew by 11.7% over the same week in 2010. Reuters/Univ. of Michigan survey showed an increase in consumer sentiment to 69.9 against 64.4 in Nov ‘11, but was 18% lower than its average level since 1978. Initial unemployment claims fell to 364,000. New orders for manufactured durable goods increased by 3.8%. New home sales increased by 1.6%, but the median price dropped. Not great figures, but not doom and gloom either.

FTSE 100 Index Chart

The FTSE 100 index chart tried to follow the lead from the S&P 500, but was less successful in its efforts to reverse the bearish trend. The index dropped to its lowest level for the month on Tue. Dec 20 ‘11. The subsequent rally climbed above the 20 day and 50 day EMAs but stopped short of the 200 day EMA. A weekly close above the 5500 level was accompanied by very low volumes.

The technical indicators are looking weak. The slow stochastic dropped below its 50% level, and failed to get back into the bullish zone. The MACD slipped into negative territory before managing to scramble back into the positive zone. The RSI fell below its 50% level and remained there. The ROC tried valiantly to clamber back into positive territory but failed. Looks like the Santa Claus rally may be skating on thin ice.

The UK economic outlook continues to be bleak. Q3 GDP growth was revised upwards to 0.6%; but services sector output contracted by 0.7% in Oct ‘11. Q4 GDP may be poor, and a threat of recession is looming large. The current account deficit in Q3 ballooned to 15 Billion sterling - its widest since 1955.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices embarked on Santa Claus rallies, but on low volumes. The possibility of the rallies continuing during the last week of the year can’t be ruled out. Bears may use the opportunity to sell. Buying can be considered only on clear breaks above Oct ‘11 tops.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Dec 16, ‘11

S&P 500 Index Chart

The small rounding-top bearish pattern observed on the S&P 500 index chart pattern last week led to a small correction-cum-consolidation. The outcome was along expected lines because of the contradictory technical signals. The technical indicators were looking bullish but were also showing negative divergences.

The technical picture has turned weaker. The index closed below all three EMAs on Fri Dec 16 ‘11 – a bearish weekly close due to the high volumes. The 20 day EMA failed to cross above the 200 day EMA and has turned down. A breach of the Nov ‘11 low of 1159 would form a bearish pattern of lower tops and lower bottoms. As long as the Nov ‘11 low holds, the bears won’t regain control.

The technical indicators are showing bearish signs. The slow stochastic has dropped from its overbought zone, but is above the 50% level. The MACD is barely positive and touching its signal line. The RSI is looking bullish as it rises above its 50% level. But the ROC has dipped into negative territory. The contrary signals means some more consolidation in the offing.

The US economy is starting to get back into the growth path, but too slowly. Initial unemployment claims decreased by 19000 to 366,000 – comfortably below the 400,000 mark. New loans and leases to small businesses have been increasing for the past 15 months – considered as a leading indicator of economic growth. But industrial production in Nov.’11 was down 0.2% on a month to month basis, following a 0.7% increase in Oct. ‘11.

FTSE 100 Index Chart

The small bearish rounding-top pattern on the FTSE 100 index chart had pushed the index below the 200 day EMA last week. Negative divergences in otherwise bullish technical indicators encouraged the bears to sell. The index closed the week below all three EMAs.

The technical indicators have turned weaker. The slow stochastic is falling towards its 50% level. The MACD is barely positive and clinging to its signal line. The RSI is above its 50% level, but its up move has stalled. The ROC is looking bearish by falling sharply into negative territory. Watch the Nov ‘11 low of 5075 closely. If the FTSE falls below it, the bears will regain control. Till then, expect some more consolidation.

The global economic outlook for 2012 seems bleak. Europe may already be in recession. The UK may be slipping into a double-dip recession. Order books of UK factories are shrinking due to poor domestic demand and the slow down in exports to Europe. Top retailers are facing losses.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are struggling to keep the bears at bay. So far, the Nov ‘11 lows have held. A fall below could lead to sharp declines. This isn’t a good time to be adventurous. Hold on to your cash and await a clear trend.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Dec 9, ‘11

S&P 500 Index Chart

In last week’s technical analysis of the S&P 500 chart pattern, I had commented: “Expect a bit of consolidation before the index makes up its mind about the next move.” That was exactly what the index did during the past week - closing above the 1250 level on four out of the five trading sessions – but making very little upward progress.

The good news for the bulls is that index is trading above all three EMAs, with the 20 day EMA about to cross above the 200 day EMA. The bad news is that the index has made a small rounding-top pattern, which may be signalling an end to the brief rally. Also, the slow stochastic and the RSI are showing negative divergences by touching lower bottoms in Nov ‘11 while the S&P 500 touched a higher bottom.

The technical indicators are looking bullish. The slow stochastic has re-entered its overbought zone. The MACD is positive, and above its rising signal line. The RSI is above its 50% level, but appears reluctant to move higher. No such hesitation with the ROC, which is rising in positive territory. Some more consolidation or even a minor correction can be expected this week.

The US economic indicators are improving ever so slowly. Initial jobless claims at 381,000 were at the lowest level since Feb ‘11. The Reuters/Univ of Michigan Consumer sentiment index at 67.7 was at a 6 month high, but remains below its long-term average. Even the ECRI’s Weekly Leading index rose, though the institute is standing by its earlier prediction of a recession.

FTSE 100 Index Chart

The technical indicators of the FTSE 100 chart were looking bullish last week, which pointed to a continuation of the rally. But after a brief foray above the 200 day EMA, the index formed a small rounding-top pattern and slipped below long-term moving average by the end of the week.

The slow stochastic is at the edge of its overbought zone. The MACD is above its signal line in positive territory. The RSI is above its 50% level. The ROC is rising in the positive zone. These are all bullish signs. But the negative divergences in the slow stochastic and the RSI may put an end to bullish hopes. Note that both touched lower bottoms in Nov ‘11 while the index touched a higher bottom.

UK’s opting out of the European Union agreement to protect its financial interests may have far-reaching negative consequences. There is a good possibility that its manufacturing exports to the Eurozone will suffer. Already, there is a slow down with manufacturing output declining by 0.7%. The good news is that the Eurozone isn’t going to break-up and the euro may not disintegrate.

Bottomline? Chart patterns of the S&P 500 and FTSE 100 indices are showing some signs of weakness, but as long as the Nov ‘11 lows hold there should be no cause of worry. The Oct ‘11 highs are barriers on the upside that need to be crossed for bulls to regain control. Expect some more consolidation or correction. Wait for a clear trend to emerge.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Dec 2, ‘11

S&P 500 Index Chart

The downward break from a symmetrical triangle pattern (in yellow) observed on the chart of the S&P 500 index last week, met its downward target of 1160. Instead of falling deeper into a bear market, the index made a surprising turn around to climb above all three EMAs in another attempt to return to a bull market.

Note that the S&P 500 is facing resistance from a horizontal dotted line drawn from the apex of the symmetrical triangle. The index did cross above the dotted line on an intra-day basis but has failed to close above it convincingly. Except for a volume spike on Wed. Nov 30 ‘11, when the index climbed above all three EMAs, the volumes during the latest rally hasn’t been great. Rallies need volume support to sustain.

The technical indicators are looking mildly bullish. The slow stochastic has climbed above its 50% level. But the RSI dropped back on to the 50% level after briefly crossing it. The MACD has moved above its signal line, but is still negative. The ROC reached its ‘0’ line, but has slipped back into negative territory. Expect a bit of consolidation before the index makes up its mind about the next move.

The trigger for the sharp rally was the joint decision by six central banks - including the US, Canada, Japan, UK, Swiss and ECB - to make dollar liquidity swaps cheaper by 50 bps to provide more liquidity to global money markets. China simultaneously lowered its liquidity reserve requirements. The steps won’t solve the sovereign debt problems by any means, but will provide some breathing room. The positive US employment data (drop in unemployment rate and increase in non-farm payrolls) and increase in consumer confidence helped the bullish cause.

The economic growth in the US remains painfully slow, and it will take a long time for a full recovery. A good time to be cautiously optimistic – not wildly bullish. 

FTSE 100 Index Chart

The FTSE 100 chart had broken down below the descending triangle pattern (in yellow) last week, but the break turned out to be a ‘false’ one. Some times, break outs turn out to be ‘false’ if the volumes accompanying the break out on the downside are unusually large. That wasn’t the case here. Triangles tend to be unreliable in giving hints about the direction of the eventual break. These are challenges faced in technical analysis.

The FTSE 100 closed the week just above its 200 day EMA, and the technical indicators are pointing to a continuation of the rally. The slow stochastic has risen above its 50% level. The ROC has entered positive territory. The MACD is above its signal line, and about to enter the positive zone. But the RSI has dropped below its 50% level.

Despite the bullishness in the index, the ground realities remain grim. The UK unemployment rate rose to its highest level in 15 years. British factories are facing sharp slowdowns. Consumer confidence is falling. Inflation is up to 5%. The UK economy is showing all signs of dipping into another recession.

Bottomline? The chart patterns of the S&P 500 and FTSE 100 indices have turned around after ‘false’ break downs from triangle patterns. Both indices may be preparing for a year-end rally – thanks to the action by central banks to flood the money markets with more liquidity. Enjoy the ride while it lasts – eventually some one will have to pay the piper.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Nov 25, ‘11

S&P 500 Index Chart

The S&P 500 index chart had another lower close in the Thanksgiving holiday week. I had made the following comment last week: “ (the index) is likely to fall to about 1160 before one can expect some recovery.” As if on cue, the index closed the week at 1159. Some times technical analysis works like magic – but no sleight of hand here. The downward target was arrived at by drawing a line parallel to the upper boundary of the symmetrical triangle pattern (in yellow).

The sharp correction has brought the 20 day EMA down to the 50 day EMA. A cross below will be the final confirmation of a return to a bear market. The technical indicators are looking bearish to the point of being oversold. The slow stochastic is deep inside its oversold zone. The MACD is falling below its signal line into negative territory. The RSI is just above its oversold zone. The ROC is sliding deeper into the negative zone. A likely upward bounce may be used by the bears as a selling opportunity.

The US economy is taking baby steps towards recovery. Q3 corporate profits rose 11.4% on a YoY basis. Initial unemployment claims rose by 5000 to 393,000 but remained below the psychological 400,000 mark. Rail traffic rose about 2% YoY. Durable goods orders declined a bit. Same store retail sales grew 2.8% YoY. A double-dip recession seems unlikely, provided problems in China and the Eurozone don’t aggravate.

FTSE 100 Index Chart

 

The FTSE 100 index chart broke below the descending triangle pattern (in yellow), as was expected last week, and touched an intra-day low of 5075 on Nov 25 ‘11. But it turned out to be a ‘reversal day’ (lower low, higher close), as the bulls were helped by short covering.

Sharp falls from a clearly visible bearish pattern are often followed by equally sharp pullbacks. At the time of writing, the index had gained 3%. But the dual resistance from the falling 20 day EMA and the lower boundary of the descending triangle may prove too strong. The break below the triangle was a selling opportunity. The pullback is another opportunity to sell.

The technical indicators are bearish, but showing signs of turning back from oversold conditions. The slow stochastic is in its oversold zone, but turning up. The MACD is still falling below its signal line in negative territory. The RSI stopped short of dropping into its oversold zone. The ROC is negative, but bounced up sharply.

The Paris-based OECD expects the UK economy to enter a double-dip recession with GDP  growth projected at only 0.5% in 2012. The Bank of England may need to increase its QE amount to promote growth. Cash-strapped companies are finding it difficult to hire, invest and get bank loans. The German bond issue flopped. Italy’s yields are rising to unsustainable levels. Eurozone worries remain.

Bottomline? The chart patterns of the S&P 500 and FTSE 100 indices have fallen deeper into bear markets, and may be heading towards their Oct ‘11 lows. At times like these, no action may be the best action. Preserve your cash.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Nov 18, ‘11

S&P 500 Index Chart

In last week’s analysis of the S&P 500 index chart pattern, I had observed a symmetrical triangle consolidation pattern. Since consolidation patterns tend to be continuation patterns and the index had entered the triangle from below, the expected break out was upwards. But triangles are often unreliable, so I had warned investors to trade with caution because a break out could occur in either direction.

On Thur. Nov 17 ‘11, the index broke downwards on the highest volumes of the week, and dropped below all three EMAs. The 20 day EMA - which had crossed above the 200 day EMA and raised hopes of a return to a bull market - has dropped back on to the long-term moving average. The 50 day EMA failed to get close to the 200 day EMA, let alone cross above it. Though the index managed to close above the 1200 level on a weekly basis, it is likely to fall to about 1160 before one can expect some recovery.

The technical indicators are looking quite bearish. The slow stochastic is about to enter its oversold zone. The MACD is barely positive, and is falling below its signal line. The RSI has dropped below the 50% level. The ROC failed to enter positive territory, and is sliding down. The bears are regaining control once again.

The US economy is finally sprouting some green shoots. October housing starts showed marginal improvement, and industrial production rose by 0.7% (an improvement over the 0.1% drop in September). Weekly unemployment claims fell to 388,000. These numbers are not worth celebrating by any means, but a sign that the tide may finally be turning. But the Eurozone debt problems remain a bearish overhang on the stock market.

FTSE 100 Index Chart

Last week, I had made the following comment about the FTSE 100 chart pattern:

“The index is consolidating within a triangle pattern, but it looks like a bearish descending triangle from which the likely break will be downwards.”

Unlike a symmetrical triangle that is unreliable in indicating the direction of the eventual break out, descending (and ascending) triangles typically break out through the horizontal side of the triangle.

The FTSE 100 made another futile effort to cross above the 200 day EMA, dropped below all three EMAs by the end of the week and just about managed to remain within the descending triangle. But the bears have prevailed as expected. At the time of writing this post, the index has dropped more than 125 points, and is likely to test its Oct ‘11 low in the near future.

The technical indicators are looking bearish. The slow stochastic and the RSI are about to fall into their oversold zones. The MACD is below its signal line, and on the verge of turning negative. The ROC is inside negative territory. More correction is on the cards.

The Bank of England has warned that the UK economy is grinding to a halt and has cut the GDP growth forecast for 2012 to 1% (from the previous forecast of 2%). Unseasonably warm weather has reduced offtake of winter garments in retail outlets. Change of guard in Greece, Italy and Spain has not removed the Eurozone debt problems. The  economic woes continue.

Bottomline? The chart patterns of the S&P 500 and FTSE 100 indices have technically slipped back into bear markets. Things may get worse before they get any better. Stay in cash, and wait for the selling to abate.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Nov 11, ‘11

S&P 500 Index Chart

The S&P 500 index chart had another weekly close above the 200 day EMA, and is consolidating within a small symmetrical triangle pattern. The likely break out from such a triangle is upwards, since consolidation patterns tend to be continuation patterns. But triangles are unreliable patterns, and the break out can be in either direction – so trade with caution.

The technical indicators are giving mixed signals, which isn’t unusual during periods of consolidation. The slow stochastic is just above the 50% level, but touched a lower bottom. The MACD is positive, but below its signal line. The RSI is at the 50% level. The ROC has climbed back into positive territory, after touching a lower bottom. The 20 day EMA is entangled with the 200 day EMA. The 50 day EMA is rising, but is still below the 200 day EMA. The index is technically in a bull market, but things may change in a hurry.

The economy is showing a few encouraging signs. Weekly jobless claims fell to 390,000 – below the psychological 400,000mark. University of Michigan’s Consumer Sentiment Index came in at 64.2 – its third straight monthly improvement, but still below the average level of 69.3 during the past five recessions. The dark clouds haven’t blown away altogether. Container traffic between Asia and USA declined 3.8% in Q3, the first decline since Q4 ‘09. Rising oil price is another concern.

FTSE 100 Index Chart

Last week’s trading ended with a slightly higher weekly close for the FTSE 100 index chart, but a failure to cross above the 200 day EMA. The index is consolidating within a triangle pattern, but it looks like a bearish descending triangle from which the likely break will be downwards. The 20 day and 50 day EMAs are still rising, but are below the 200 day EMA. The struggle by the FTSE 100 to re-enter a bull market continues.

The technical indicators are looking bearish. Both the slow stochastic and the RSI are below their 50% levels. The MACD is below its signal line, and falling in positive territory. The ROC is trying to climb back into the positive zone. The index is technically in a bear market.

Unemployment in the UK is at a 17 year high, and is expected to rise further. A double-dip recession may be avoided, but the GDP growth in 2012 is likely to be a paltry 1.2%, as per this article. British companies like Vodafone, Diageo, Dixons, Unilever are reeling from the crisis in the Eurozone. Change of leadership in Greece and Italy – both new Prime Ministers are Ivy League trained economists – may provide temporary succour to stock markets, but long-term concerns about their debt problems remain.

Bottomline? The chart patterns of the S&P 500 and FTSE 100 indices continued their respective struggles – the former to remain in a bull market; the latter to get out of a bear market. This isn’t a time to be aggressive or proactive. Passive optimism and capital preservation should be the strategy till the end of the year.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Nov 04, ‘11

S&P 500 Index Chart

Two weeks back, there were a few doubts whether the bears have been vanquished or not. Those doubts have now been removed. The S&P 500 index is trading comfortably above the 200 day EMA. The 20 day EMA has crossed above the 50 day EMA, and is about to cross above the 200 day EMA as well. Once the 50 day EMA climbs above the 200 day EMA, a return to the bull market will be confirmed.

The technical indicators are correcting overbought conditions, but remain bullish. The slow stochastic has dropped from its overbought zone, but remains above the 50% level. The MACD is positive and touching its signal line. The RSI dropped after touching the edge of its overbought zone, but has bounced up from the 50% level. The ROC has bounced up from the ‘0’ line, back into positive territory.

Note the positive divergences in all four technical indicators that preceded the sharp rally during Oct ‘11. The index dropped to a lower bottom, but all four technical indicators made higher bottoms.

The US GDP grew at an annualised rate of 2.5% in Q3 – nothing great, but growth nevertheless. The manufacturing PMI slipped to 50.8 in Oct ‘11 from 51.6 in Sep ‘11 – a sign of slowing expansion. Weekly unemployment claims were 397,000 – still high, but below the psychological 400,000 mark. Compared to the chaos in Europe, the US economy seems to be slowly grinding its way out of trouble.

FTSE 100 Index Chart

The FTSE 100 index chart tried to follow in the footsteps of the S&P 500 chart out of a bear market. But a brief foray above the 200 day EMA is all that it could manage so far. The index dropped below all three EMAs, and is currently facing resistance from the falling 200 day EMA.

The technical indicators are showing some weakness. The slow stochastic has slipped below the 50% level after dropping from the overbought zone. The MACD is touching its signal line, and has started sliding in positive territory. The RSI bounced up from its 50% level after touching its overbought zone. The ROC bounced back after dipping into negative territory, but is heading down again.

The chaos caused by last week’s Greek drama seems to be abating. They look all set to accept austerity measures to avail the debt bailout. The next big problem is likely to be Italy, where bond yields are reaching unrealistic proportions. UK’s Q3 GDP grew a miniscule 0.5%, while manufacturing PMI slipped to 47.4 in Oct ‘11 from 50.8 in Sep ‘11 – a sign of contraction. Looks like a long, hard winter ahead.

Bottomline? The chart patterns of the S&P 500 and FTSE 100 indices continued their surprisingly strong rallies, with brief forays above the 200 day EMAs. The S&P 500 is showing signs of returning to a bull market, thanks to an economy that is growing ever so slowly. The FTSE 100 may revert to a bear market as there are ominous signs that the UK economy may slip into a recession again. Remain stock specific. Unless Eurozone debt problems are resolved satisfactorily, there is no point in feeling too bullish.

Stock Index Chart Patterns – S&P 500 and FTSE 100 – Oct 21, ‘11

S&P 500 Index Chart

Last week, the technical indicators of the S&P 500 index chart were pointing to a continuation of the rally. The rally, supported by decent volumes, led to the highest close since Aug 2 ‘11, and a close above the 200 day EMA.

The 20 day EMA is about to cross above the 50 day EMA, and all four technical indicators are looking bullish. Have the bears been vanquished? It appears so, but there are a couple of warning signs for the bulls. Both the RSI and the ROC failed to reach new highs with the index. The negative divergences may stall the rally.

Decent corporate Q3 results, and the possibility of a resolution of the Eurozone debt problems are probable causes of the rally. End of the financial year considerations may also be behind the buying. If the bail-out plan in Europe doesn’t work out, global markets may face a lot of selling.

US economic indicators are hardly encouraging. Housing starts rose by 15%, but new building permits fell 5% in Sep ‘11. Weekly unemployment claims dropped to 403,000 but remained above 400,000. ECRI’s WLI growth indicator dropped further to –10.1 from –9.7 a week earlier.

FTSE 100 Index Chart

The FTSE 100 index formed a ‘reversal day’ pattern (higher high, lower close) on Mon. Oct 17 ‘11. The index consolidated sideways for the rest of the week, receiving good support from the 50 day EMA before closing a bit higher on a weekly basis.

The technical indicators are looking bullish, and the index may move up to test resistance from the 200 day EMA. Further continuation of the rally will depend on an early resolution of the Eurozone debt crisis.

UK retail sales picked up 0.6% YoY in Sep ‘11, but were down –0.2% for the Jul-Sep quarter. Manufacturing output fell 0.3% in Aug ‘11. Public sector job losses are now more than private sector job gains. The possibility of a double-dip recession can’t be ruled out.

Bottomline? The chart patterns of the S&P 500 and FTSE 100 indices continued their surprisingly strong rallies that are threatening to break the strangleholds of the bears. A satisfactory resolution of the Eurozone debt crisis has already been discounted by the markets. Any disappointments on the debt relief front may trigger off widespread selling. Better to be cautiously optimistic, instead of being brave.

Comparative performance of Sensex and global indices

One keeps reading and hearing that the Sensex has been one of the worst performers among global stock indices over the past one year. So I decided to take a look at some of the leading global indices (in blue) to check whether the Sensex (in green) has been an underperformer or not.

Here is what I found:-

S&P 500 vs. Sensex

The S&P 500 index has not only outperformed the Sensex by a wide margin, but has eked out a 5% gain over the past year despite the economic slow down in the USA.

FTSE 100 vs. Sensex

The UK economy is in a bad shape with growth almost non-existent. Still, the FTSE 100 has outperformed the Sensex right through the past year – despite losing 5%.

DAX vs. Sensex

The German economy is stronger than the UK’s, but the DAX has lost 10% over the past year. Despite the steep fall in Aug ‘11, it managed to outperform the Sensex.

Bovespa vs. Sensex

India is no match for Brazil on the soccer field, but the Sensex has managed to outperform the Bovespa by more than 5% over the past year.

MERVAL vs. Sensex

The Argentine index has not gained during the past year, but has outperformed the Sensex by a wide margin.

Hang Seng vs. Sensex

Hang Seng is the only other major global index that has underperformed the Sensex, thanks to its steep fall over the last two months.

Jakarta Composite vs. Sensex

The Indonesian index has been one of the best performers in Asia, though it has made zero gains during the past year. It has significantly outperformed the Sensex.

KLCI vs. Sensex

The Malaysian index outperformed the Sensex throughout the past year, though it has lost about 3%.

The Sensex has indeed been an underperformer against major global indices – with the exception of the Bovespa and the Hang Seng. India’s economy is still growing in spite of the recent slow down due to high interest rates. When the turnaround comes, the index is likely to become an outperformer.