Weekly Market Recap

In line with my expectations, NIFTY took a support at horizontal resistance turned into support line as depicted on daily chart in my last blog, not only took a support, but bounce-off sharply and precipitously. Although, amid high volatility it looks like market has gained a lot, however, the gain was only 1% on a weekly basis.

In the week gone by, the benchmark SENSEX closed up by 453 points, or 1.20% at 38127, and NIFTY gained 130 points, or 1.17% settled at 11305, whereas, underperformance continued by BANKNIFTY which gained 310 points, or 1.12%.

Current Outlook

What got an attention is Friday’s move, in a follow through on Thursday bounce, major indices rallied substantially further after gap up opening on Friday, however, rally couldn’t sustain, suddenly market given up all the gains to fell into negative territory and kept oscillating between negative and positive zone. Although, eventually, both NIFTY and SENSEX managed to closed with a gain of half percent, whereas, BANKNIFTY couldn’t recoup its early gain and closed flat for the day. I think, this underperformance by the BANKNIFTY will continue going forward and that’s a veritable evidence to ruminate about the impending correction in major indices as banking stocks have heavy weightage, not only that weightage of 3 private bank stocks got up significantly in last few days which is not a healthy sign.

Technically, the head and shoulder pattern on weekly chart is still intact, and it will remain intact unless price move above 11600 (see chart below). Once that happens, the head and shoulder structure will be irrelevant and I will pretty much give up the idea of prevailing weakness in the market. Moreover, negative divergence among the indicators on long-term weekly and monthly chart is still in favour of bears until resolve otherwise. However, on daily chart the indicators are neutral or in the middle of the range which are tenuous and indecisive to provide a heuristic and apocalyptic move. Like I wrote last week, next week action is crucial to prognosticate the direction and outlook of the market, hence, outlook still appears to be neutral on the back of slightly positive in short term and negative in long-term.

Conclusion

I am supposed to be focussed on technicals, but sometimes news rules the day or week. I don’t want to be stubbornly pessimistic, but I’m not going to be overly optimistic either. Back to technicals, I can think of continued upside in short-term, but I don’t like Friday’s heavy selling at the peak. Last week, I was neutral about my expectations for this week, and that turned out to be not too far off the mark. I think, I should remain neutral in my expectations for next week.

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Be patient..!; Be a Savvy Investor..!!

Pankaj