Weekly Market Recap
The market this week has mostly been straight up since Monday till Thursday which I didn’t expect, as a result NIFTY touched a fresh all-time high at 12158, however, the break-out couldn’t sustain more than a day, eventually on Friday market got reversed to get back under the previous peak, although the break-out was quite impressive.
In the week gone by, the benchmark SENSEX closed up by 434 points, or 1.08% at 40793, and NIFTY was up by 141 points, or 1.19% settled at 12056, whereas, BANKNIFTY continued to be the leading index with a gain of 2.68% and also managed to closed at fresh all-time high at 31946.
Current Outlook
The current precipitous rally was launched off early october low. Since then, the VIX (volatility index) is also drifting lower gradually, characterized by a reluctance to decline, and a penchant for small, daily advances.
Today, I am depicting the chart of NIFTYBEES along with NIFTY (below) to truly understand the relationship between price action and volume. As NIFTY sometimes shows exceptionally high volume due to weekly future and options expiry. I think, the ETF NIFTYBEES which is nothing but the reflection of NIFTY might give true picture to analyze the nuances of technicals. As it can be clearly seen on the chart below that NIFTYBEES made a new high on Tuesday, whereas NIFTY made on last Thursday i.e. on expiry day. Not only that the candle formed on NIFTYBEES chart on Tuesday is a solid red candle that means the top of this candle should act as strong resistance in near future. And, the indicators in lower panel is quite weak for NIFTYBEES as compared to NIFTY, it is a great mismatch.
In addition, the chart is extremely stretched since it rallied precipitously since early October, and it makes no sense to chase it here. Instead, this where patience could pay-off, because when it does finally pull-back, you can bet whose who appeared to be missed out at first.
Conclusion
The trend is up, but the market condition is somewhat overbought and showing negative divergences persistently. Though seasonality is positive. I do not care for the market action we have seen since the October low, particularly the generally not very high NIFTYBEES total Volume seen in the last three weeks while going up. Yes, the market has been going up, and that’s great, but it does not even try for healthy pullbacks. This will be great for the bulls for as long as it lasts, but the piper will be paid eventually. I can’t know when this will end, but I’m thinking toward the end of December or early-January. Sooner is not out of the question.
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Stick to your model..!; Be a Savvy Investor..!!
Pankaj