Weekly Market Recap
My warning came just right on time! For the past few weeks, I have been concluding on a cautious note and emphasizing to exit or reduce long exposure to the minimum. After having a roller-coaster ride last week, this week was no different, except we saw a cascading fall on Thursday. I think it is the biggest single-day fall in two years. Though markets managed to recoup half of their losses on Friday, but still down significantly.
In the week gone by the benchmark, SENSEX lost a whopping 1974 points, or 3.41% to settle at 55858, similarly, NIFTY plunged 617 points, or 3.58% to close at 16658.
Current Outlook
Noise is preposterous! With the media constantly blaming this down market on Ukraine, however, the charts had already given enough good signals which were not propitious for the bulls and something noxious is about to happen. The same configuration occurred before the COVID-19 crash as well, as I had been persistently bearish before the crash and wrote in my weekly blogs. Ironically, we tend to remember or justify these kinds of falls by the incident who triggers them, however, the actual selling or buying started-off way before these incidents unfold. Analyzing the stock market by observing its movements is the key premise of technical analysis and the one I adhere to. The stock market has a language all its own, and potential investing aid lies in studying its movements with nuances.
Fortunately, or unfortunately, we are bombarded with information from sources such as television analysts, brokerage firm analysts, economists’ projections, newspapers, junk mail, neighbors, war reporters, fake news, etc. All of this is noise – period. Noise is the short-term interference that causes investors to deviate from a well-thought-out investment plan. Noise is difficult to ignore because at the time it seems so important. The emotional roller coaster of trying to utilize all this information can have a devastating effect on your wealth…and your health.
Coming to the current outlook, last week, I talked about the formation of descending triangle on the NIFTY that formation normally resolves in a downtrend. As we can see in the chart below the NIFTY has broken down decisively below that triangle and the base of the triangle is coinciding with the 200-day SMA (black line). Technically, the index or the stock is supposed to be in an uptrend or downtrend if stays above or below the 200-day SMA respectively. Apparently, the price seems to have lost its uptrend with its key levels which may act as resistance going further.
Conclusion
We are seeing wild swings in the market and it becomes difficult to ignore the noise as it seems so important. However, we should stick to our rule-based investing or trading model that eliminates all its noise. Sitting aside and waiting patiently is the key at this juncture.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj