Weekly Market Recap
It looks like the market took my warning gravely, thus acted precisely in line with my expectation. The week started off with a sharp fall in stock prices specially the heavy weights that resulted into plunge in indices, though we saw a mild recovery in last two days but not enough to recoup the losing ground as we have been seeing in last few weeks.
In the week gone by the benchmark SENSEX closed down by 332 points, or .79% at 41613, similarly, NIFTY was down by 104 points, or .84% settled at 12248.
Current Outlook
I culled the same facts today, which I have been enunciating for quite a while, so as I decided not to change the heading of my blog. Last week, I depicted the bifurcation witnessed between NIFTY and BANKNIFTY and based on that I prognosticated the sluggishness and underperformance by financials going forward. Eventually, the correction in financials will lead to alleviate the major indices as they have weightage of around 40% in NIFTY.
As expected, and mentioned in my last blog, we saw a descent surge in cement and pharma stocks this week, though metals were slightly negative. I strongly believe the vicissitude among the sectors would continue to be more pronounced in forthcoming sessions that may restrained the indices in doldrum.
Technically, the negative divergences among indicators and price, and most importantly, between the VIX and price have been dominating the configuration for quite some time about which I have written a lot. In fact, bearish divergence between VIX and NIFTY happened in the last penultimate week which I noticed and wrote timely. Divergences, though, not always but some time becomes apprise of the change in the existing trend.
Technically, especially on the long-term monthly chart I found the market has become frothy which need to be correct; however, distribution is the nasty process which required endless patience and askance look to understand it. Ipso facto, I continue to have a cautious outlook specially on indices.
Conclusion
The market has given enough warning sign sometimes they are succinct, sometimes market does clamor. We downplay the warning sign in the absence of patience or for short-term gain and eventually renounce the salience outline features that could be pernicious for our financial health. Hence, be patient and be alert…!!
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Stick to your Investment model…!; Be a Savvy Investor..!!
Pankaj