Weekly Market Recap
It was a muted week for the market as the major indices tend to absorb the previous week’s solid gain which has resulted in a flat closing for the market. However, beneath the surface few stocks continued to make new highs or 52-week highs, suggesting broad participation is piling up which is a prerequisite for the sustainability of the rally.
In the week gone by the benchmark SENSEX remained flat with a marginal gain of 45 points, or .07%, closed at 62547. Similarly, NIFTY added only 34 points, or .19%, and settled at 18534. While BANKNIFTY closed by -0.18%.
Current Outlook
Though the action by the indices this week was quite muted yet not any major sign of reversal appeared so far. Market breadth remained strong, and the ratio of stocks making new highs to new lows is quite bullish. However, the point of waning upside momentum arises; especially at a time when the VIX (volatility index) breached below 10 which is quite rare and scary too. I have mentioned in my previous blog that the VIX may remain low for a quite long period, but the instances in history after such a period are sharp reversals.
So, in a flummoxed time like this, it is better to make things simple and pay attention to the collage of stocks that are breaking out after years of consolidation, yes astonishingly I have found few stocks which are breaking out or setting up a new uptrend after years of side-ways movement. Major indices are looking vulnerable on weekly and monthly charts, but these stocks are providing decent entry on the same horizon.
Conclusion
Since the past two months markets have been quite resilient and if indices continue to gain further out of the present technical configuration that will only add vulnerability and make the markets quite sensitive to sudden and deep correction. The best possible scenario could be indices may hover sideways and a well-positioned group of stocks may continue to do well. Hence, be stock specific and be ready to execute the selling discipline if required.
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Be Patient; Be a Savvy Investor..!!
Pankaj