Weekly Market Recap

This week, market started off on a positive note on Monday, but continued to drift lower for rest of the week in line with my expectation amid Q3 earning outcomes. Although, we saw some recovery on Friday first-half and looked like we could recoup the early week losses, however, bear tighten their grip at higher levels and managed to close the week at lower level.

In the week gone by, the benchmark Sensex lost 361 points, or .99% to settle at 36025; and Nifty was down by 126 points, or 1.16% and closed at 10780.

Current Outlook

Just last week, I wrote: Nifty stalled precisely beneath the red horizontal line that seems to be strong resistance in last few weeks and it’s a cause of concern to me. And again, this week market turned around precisely from the over-head resistance, but this time downward momentum appears to be accelerated and became a case of false break-out (above symmetrical triangle, as I wrote in my 13th, January  blog) turned out be a break-down below symmetrical triangle as depicted in chart below.

Most importantly, the behaviour of the stock price post earnings is seems to be bearish this week and I had written in my last two blogs that if we have to distinguish between bull and bear market from earing point of view; we can simply elucidate by analysing their price action after result announced. In a bull market, market tend to ignore the bad earnings and bestow reward by steep rise in their stock price after good results, and vice-versa in bear market. This week we witnessed severe punishment as compared to barely any reward. Few stocks this week were down by more than 7%, 10%, 15% or 25% that too Nifty50 Index stocks. This kind of behaviour tells me that we may continue to drift lower in coming days. Nevertheless, of more prolonged concern is persistently weak market breadth (net of advances and declines), which could force further downtrend.

Conclusion

As I neutralised my stance from bearish just before earning season began, but with negative biased, now I am turning back towards my bearish view again. I expect the market to come down. A ‘no change’ or consolidation could be the best outcome for bulls, but I think that probability is quite low.  Volatility continues to rule the market as we have union budget on 1th, February and I think market is not expecting anything from interim-budget, despite we might see populistic budget just before the general election which market never likes. Hence, my view is negative, but at same time cautious too.

I welcome any feedback, comments or questions you may have about the content of this article.

Keep Exploring..!; Be a Savvy Investor..!!

Pankaj