Weekly Market Recap

For most of the week market remained bullish except for one day fall on Friday, when on intraday basis Nifty was down more than 100 points from its peak, though it closed down by 64 points. On Friday, we saw a levelling of selling that we haven’t seen for some time now; consequently, price lost most of its weekly gain.

Finally, in a week gone by, the benchmark Sensex gained 140 points, or .37% to settle at 38164, and Nifty added 30 points, or .26% to close at 11456, whereas, Banknifty outperformance continued which was up by 201 points, or .68% closed at 29582.

Current Outlook

While bulk of evidence remains bullish for the market, there is clearly some negative undercurrent within the broader market. I am talking about market breadth which I have been talking about for quite some time persistently. One could certainly argue that the one day correction after a precipitous rally is quite normal; however, extreme negativity in breadth at the peak remain a cause of concern and that harbour a view of reversal. This week certain indicators like RSI had me looking for a short-term market top, and on Friday it looked as if it had arrived. Probably, we got a short-term top on indices this week. So far, no major technical damage occurred to call it a absolute reversal, however, at the time of weak breadth, steep and sudden decline comes without heuristically.

Technically, the candle formation (see the chart below) at the peak that is hanging man followed by bearish engulfing candle is very bearish in nature, combination of these candles suggest reversal in existing trend, this portend a decline of some magnitude is coming. On the other hand there are stocks within or out of the index that appears to be in strong uptrend and well poised for bigger upside.

Hence, I think major indices may correct or consolidate for some time and major action can be confined to stock and sector specific.

Conclusion

Technically, the candle formation coalesced with over-bought indicator suggest a pull back in indices as most often happens. On Nifty, previous horizontal resistance line will now act a support as can be seen in chart above. Hence, for NIfty decline up to this horizontal support line might not be too much to hope for.

I welcome any feedback or suggestion you may have about the content of this article.   

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

Pankaj