Weekly Market Recap
It was exceptionally choppy week for the market when indices oscillated around 5%, but the net result is almost flat on weekly basis. Market plunged in the first half of the week in line with my expectation on the back of US-Iran tension, however, managed to recoup the losses in last two days.
In the week gone by, the benchmark SENSEX closed up by 135 points, or .33% at 41599, and NIFTY was up marginally by 30 points, or .25% closed at 12256.
Current Outlook
The reduced geopolitical tensions in the Mideast can be seen by reactions in financial markets. Global stocks recovered as fast as if they plunged. The salience feature on the chart below is that price has restrained under red horizontal line which appears to act like a stiff resistance going forward. Moreover, the negative divergences among indicators in below panel are more pronounced than ever before.
Most importantly, as if I enunciated in my penultimate blog that in the last 10 years, the VIX reading at 10 suggest the market top is not far away. Eventually, we saw a nose-dive reaction in the market this week. Though, market has recovered fully sharply, but the VIX remained elevated at 14 from the low of 10 in last week. That again a sort of bearish divergence that indicate a meaningful top is looming, based on past episodes. I find that VIX doesn’t always give us a divergence like this at every top where we might like to get such a message. But when it does show us a divergence like this, it is worth listening to.
Hence, ipso facto, outlook doesn’t seem to be very bullish.
Conclusion
Though the recovery we saw in last two days was quite tantalizing, but seems fragile. The problem is that the conditions which I discussed above might be pernicious unless they get resolved as soon as possible. Thus, I would suggest, to be alert; if you can’t flinch yourself from buying.
Feedback, comments, suggestion or questions are welcome at below the comment section or at [email protected].
Stay Alert…; Be a Savvy Investor..!!
Pankaj