Weekly Market Recap
Amid gloomy start this week, markets made an attempt to cheer-up over the extent of relief package announced by the government, however, the stimuli measures could not bait the market longer except for one day spike and eventually erased all the gain to close the week in red.
In the week gone by the benchmark SENSEX lost 544 points, or 1.72% to close at 31097, while NIFTY slid 114 points, or 1.24 to close at 9136.
Current Outlook
In my last weekly note, I wrote that there was some ambiguity as the technical configuration was bifurcated between bulls and bears. This week bears managed to thwart the bulls attempt to be the conquistador, especially at a time when the market had the government support. This is not a good sign and a somberly pernicious, I mentioned the same when finance minister implausibly reduced the corporate tax in last September to support the market.
Technically, in last penultimate week we saw a false break-out in NIFTY above the rising wedge whose implication is price trend in above-average opposite direction which we have seen in recent week. As shown in the chart below NIFTY has closed below the short-term pivotal moving averages. The blue vertical lines on the chart enunciate when in past NIFTY closed below all the short-term (12 -day EMA and 21-day EMA) and intermediate-term (50-day SMA) overlaid on the price chart. Two out of three times NIFTY had a nasty decline, second one was on 24th February that followed by cascading fall in the market. In last 9 months there was one whip-saw signal registered on 8th January after that NIFTY immediately went back above the moving averages. Of course, the recent whip-saw signal appeared on last Tuesday, but I am not taking this into consideration as it was backed by government relief package announced same day.
So far, 2/3 probability goes to the favour of bears that coincide with the current long-term downtrend. Ipso facto, outlook is looking bearish unless NIFTY closed above the pivotal short-term moving averages.
Conclusion
So, at present we have a bearish sign unless it proved to be otherwise. We could see a technical correction, even a substantial one that might follow by resumption of small rally. Of course, other outcomes are possible, but I think this chart prepare us for bearish outcome.
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Pankaj