Weekly Market Recap
In yet another undecisive week, market remined sideways in a narrow range. Though some sort of correction action was being witnesses but that correction was completely restrained up to the lower end of the range without doing the technical damage on the chart.
In the week gone by the benchmark SENSEX was marginally down by 98 points, or .19% to close at 52386, similarly, NIFTY was down 32 points, or .21% to close at 15689. While BANKNIFTY did well and gained 262 points.
Current Outlook
In fact, it’s been a month market is hovering in a narrow range. Four-time NIFTY has touched its peak 15900 in last one month and equally touched its lower range 15600 except one time when NIFTY penetrated below that range that went to 15444 in the mid of June as we can see in the shaded portion of the chart below. Looks like, the consolidation is taking place; whether its an accumulation or distribution hard to say, however, break away from here could be sharp and huge. As the longer it takes the farther it goes. Last week, I mentioned that market at chaos, and it appears that NIFTY is facing stiff resistance at higher level but at the same time the support is also being respected so far. Therefore, I think the market is at the critical juncture.
The earning season has started. The impending earnings will justify the stretch valuations as I mentioned in last note both prices and earnings are rising, but prices are rising much faster. I think, the sideways movement may continue till the middle of the earning season to get the clear momentum about the earnings and its impact on stretch valuations. Any positive or negative surprises may exacerbate the move on either side.
Furthermore, I haven’t found any significant changes while analysing Net Advances-Declines, the VIX, Total Volume and Volume Ratios, they provide excellent signals on what to expect in forthcoming days. Mainly, it keeps you “in the know” on upcoming pivot points. The expectation is consolidation to follow. Hence, outlook continued to be the cautiously positive.
Conclusion
Given the market is evincing its strong resilience and unwilling to extend the correction leaves an impression that consolidation may end up in breaking out above the trading zone. However, as I have been emphasising foe quite some time, on long-term chart prices are trading much higher above the moving averages that’s make them quite vulnerable specially in the event of any kind of unexpected outcome; it could be deficit of monsoon or lower than expected earnings. Hence, be patient.
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Keep Analysing…; Be a Savvy Investor..!!
Pankaj