Weekly Market Recap
As expected, this week started off with muted action followed by some gain on Tuesday but reversed sharply thereafter and remained low throughout the week. I found, weakness looming across the sectors along with prices drifting lower which has resulted in a bearish setup.
In the week gone by the benchmark SENSEX lost 885 points, or 1.34% to close at 65397, similarly, NIFTY shed 208 points, or 1.06% to settle at 19542. And BANKNIFTY too was down by 1.28%.
Current Outlook
In my last blog post, I wrote that I am getting skeptical about the upside of the market and to me, the best-case scenario seems to be the range-bound condition for quite some time. So far, the market has turned out to be in the range while selling is quite evitable at a higher level.
In addition, I can say that the bearish setup is making progress. Though the support of the previous low is close, the depth and voracity of this decline certainly suggest it will not hold. Now, the NIFTY has fallen back below the 50-day SMA and the indicators in the lower panel of the chart are falling below the center line which is very bearish.
The VIX remained at a lower level, but the indices haven’t resulted in higher prices, so I see it as a reverse divergence. Recently, we have seen a fresh weakness among heavyweights along with financials which have maximum weightage in indices, if weakness persists in these stocks, it will weigh down the overall market.
Moreover, if the new low in NIFTY expands below the previous low then the formation of lower highs and lower lows will be established which is again a bearish setup.
Conclusion
Internal weakness is a problem with participation numbers shrinking and Indicators falling. I think the technical configuration is no longer propitious for the bulls. This condition might lead us to decline in prices while moving forward. It is time to re-engage shorts and hedges. Stops should be applied and tightened on longs.
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Be Disciplined; Be a Savvy Investor..!!
Pankaj