Weekly Market Recap
This week was expected to begin with gain in the continuation of last two days rally in previous week. In spite of strong opening this week, Indices couldn’t manage to hold on to their early gain; In fact we saw modest pull back on Thursday and early Friday, however, indices on Friday, managed to recover all the losses in last couple of hours, mainly due to sudden spike in technology stocks.
In a week gone by, NIFTY added 50 points or .46 per cent to settle at 10817, Similarly SENSEX gained 178.47 points or .50 per cent to close at 35622. Pharmaceuticals bounced back sharply from their 52-weeks lows.
Current Outlook
There is tug-of-war between bulls and bears at these levels, since last two months Nifty is stuck in trading range “between” 10500 to 10900 (see chart below). Is this the accumulation or distribution..??, Difficult to say.!!. In fact both are difficult to understand, especially distribution. Distribution got its name from the fact that stocks are being distributed from the smart hands to the not-so-smart hands. The term used to identify market bottoms is called accumulation and is usually very dramatic and quick. Sometimes only one bottom spike, sometimes more, but they are generally easier to identify; certainly so, more than distributions.
Some interesting facts, I have observed that key economic related stocks like cement and infra have been lagging and declining persistently. Moreover, market breadth which is on my must to watch-list, turned down again post some improvement in early week, surprisingly even on Friday, when indices recovered sharply and closed in green, market breadth were persistently declining until the market closed. The Advance decline ratio available on NSE after closing on Friday, is .62 (advances = 680, declines= 1096)
These are nasty periods in the market, very difficult to make money. The buy and hold crowd get nauseous. Lots of emotion is at play.
Conclusion
I need to close on the note that the current market could easily be setting up a period of distribution with its big up and down moves and volatility. Could we have seen the top? Is this a double top? What is going on here? However, as a simple rules-based trading model is required and just follow the model. I do however feel the need to comment on what I see happening; this is not an easy market.
I welcome any feedback you may have about the content of this article.
Be a rule-follow trader…! Be a Savvy Investor..!!
Pankaj