Weekly Market Recap
Market continued to be sideways for a third week in a row, although on Thursday NIFTY tried to touch its previous peak but couldn’t sustain for long, subsequently ended up in red on Friday that made the weekly closing flat again.
In the week gone by, the benchmark SENSEX ended almost flat with a negligible gain of only 2 points, or .01% at 40359. Similarly, NIFTY closed up with a gain of 18 points, or .16% at 11914.
Current Outlook
So far, the dominant configuration on the weekly chart has been the possible double top formation on NIFTY is under progress, however, in a very short-term on daily chart the double top formation is not only apparent, but seems to be done that too with short-term negative divergence as can be seen on the chart below. Moreover, ideally when the market goes up, we normally expect new highs to expand and new lows to contract. So far, the opposite is happening, and that is negative signal at least for the short term. We should also note that expansion of new lows against a rising price trend is negative by itself, that too with weakening leaders is double whammy.
Among NIFTY, heavy weight stocks have made new highs; however, NIFTY hasn’t been able to touch its new high is also an effective warning flag. New highs and new lows should expand or contract in logical concert with their price index. When they don’t, watch out. On positive note, despite fading upward pressure, no significant downward pressure is witnessed and price has been able to sustain higher that may also lead the short-term climactic rally.
Provided major indices has been in a narrow range for last three weeks, so the sharp move to either side is expected in coming days or next week, but an abundance of negative divergences still erodes my upward confidence. Hence the current outlook is yet to be clear among ambiguity of many factors.
Conclusion
The trend is up, but internals are overbought. Many indicators have gotten progressively weaker since their past peaks. Each successive internal top is lower than the one before it, and negative divergences is not delivering the implied subsequent price weakness, but ideally it should get resolved with decline in price. Considering the stubbornness of the advance, I would not be surprised if it continued well into December; however, the intermediate-term indicators above have all topped, and a short pullback is more likely.
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Keep Watching..!; Be a Savvy Investor..!!
Pankaj