Weekly Market Recap
It was quite a week for the market. There was a bull/bear battle every day since the NIFTY faced an occlusion and stalled last week. This week, the market dropped Monday and Thursday, creating a weekly down candle to follow last week’s stall. Almost all the sectors participated in the decline but not in the bounce, especially the high-growth technology stocks.
In the week gone by the benchmark SENSEX lost 812 points, or 1.36% to 58833, similarly, NIFTY shed 199 points, or 1.12% to close at 17558. While BANKNIFTY remained absolutely flat with a gain of 1 only point.
Current Outlook
As I have remained cautious for the past couple of weeks provided NIFTY has reached the top at end of the channel; after breaking above the channel, it has fallen dramatically into the channel and now looks like it may face stiff resistance in crossing above that level. Technically, the information jumping off the chart is sitting in plain view. There are many conditions that suggest the bulls are losing their ground and the outlook may turn into peril for them. The topmost priority should be given to the price behavior; the overall technical structure is following the previous price pattern as it has been very common for the price to move sharply between the low and high end of the range. In the past year, the sharp vertical rise has always been followed by torrential fall. The same is quite evident among the indicators in the lower panel of the chart. As they are rolling down from their highest reading suggests a shift in momentum from upward to downward.
It is indispensable to note the following current conditions.
- The price is hovering in the channel which is tilted downward suggesting the one-year or long-term trend is still down.
- 50-day SMA (green line) is below the 200-day SMA (black line)
- Failing to bounce above the channel enunciates the typical bear market.
- Low volume on the rally.
- Price stalled at the key resistance level.
- The VIX is bottoming at the lower end of the range.
There are lots of signals not shown here, and they all go towards interpretation. I have seen a group of charts change. The current set-up doesn’t favor the bulls and put the outlook in peril. However, I would wait patiently for some more evidence as trading with the market’s main trend is hard enough. It is really hard trading against it.
Conclusion
The current configuration tells me to expect further downside, however, if we would rally next week, then that would be the first time in 2022 for such a pattern to have emerged.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj