Weekly Market Recap
Market continued to rally this week in line with my expectation, as I observed and wrote last week that selling is being absorbed at higher level despite having negative news about the economy which can turn out to be spike in stock prices. This is a third consecutive weekly gain and sixth weekly vertical gain except one week pause as shown in chart 1 below.
In the week gone by the benchmark SENSEX surged 850 points, or 2.42% to close at 36021, similarly, NIFTY added 224 points, or 2.16% and settled at 10607.
Current Outlook
Last week, I noticed and wrote that technology stocks are making come back and supporting the indices. I think, these stocks have enough room and steam left to push the indices higher. The rest of the market, however, continued to lag. Chart 2 shows the BANKNIFTY is far behind the NIFTY as far as recovery is concerned, moreover, BANKNIFTY is at initial overhead resistance that needs to be clear to improve its trend in line with NIFTY. However, if that happens its resonance will be more pronounced in NIFTY, provided congregation of financial stocks have maximum weightage in NIFTY followed by technology. For a time being, weak financials stocks are one of the negative features.
Among few sectors, technology is the clear winner and the only sector after FMCG that appear to recoup all its losses sooner than later. However, technically, I see serious problem on FMCG stocks going forward on long-term monthly chart which have been enjoying the luxury of super rich valuation for quite long-time. Other gainer includes health care stocks, the covid pandemic have given a boost to them, but they are more or less, news driven, which I would like to avoid.
Like, I mentioned last week, the market breadth is improving since past few days, however, this week breadth was not as strong as it was until last week while indices continued to move higher that makes a case of divergence and indicates risk is on. That is why I have been emphasizing buying on relatively stronger stocks, instead of chasing the indices.
Market biased is positive amid extreme negativity. In addition, technically, the market conditions appear to be ameliorating, hence, outlook at least in near term is positive and suggest, yes, we can go higher from here.
Conclusion
Sentiment is stand alone one of the strongest contradictory indicators to indicate the impending change of trend in market. Currently, sentiments are still negative, though not extremely, hence, it is axiomatic to presume that market may continue to move higher unless investors become complacent and sentiments improved drastically. Nevertheless, be ready with exit strategy when it is required, till then enjoy the ride.
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Trade your plan…!, Be a Savvy Investor..!!
Pankaj