Weekly Market Recap
Last week my blog heading was “Is Selling Over? Perhaps, Not Yet…!!” and the market fully respected my view and continued to slide further. In fact, Friday was the historical day when trading halted immediately after the opening when major indices touched the circuit level which is occurred after a fall of 10%. However, market recovered very fast when trading resumed after 45 min and managed to end the day in positive territory.
In the week gone by, the benchmark SENSEX plunged 3473 points, or 9.24% closed at 34103. Similarly, NIFTY lost 1034 points, or 9.41% settled at 9955.
Current Outlook and Condition
The stock market has a mind of its own, and its movements are full of shenanigans which is most difficult (I would repel myself to say impossible) to predict, however, by sincerely following the rule-based-trading mechanism we can get enough clues about current condition and the impending direction of the market that can certainly protect us from such a historical devastating event like we have witnessed recently.
Well, the way the market plunged and recovered on Friday suggest me selling climax occurred means selling is done, but VIX (volatility index) still not suggesting the same. As the market plunged and recovered, but VIX remained elevated at historical level at 51.47, 100% up this week which is not a good sign and digress me to conclude that selling is over.
Technically, the market is over-sold on both daily and weekly charts, perhaps that’s the reason of bounce on Friday, however, on monthly charts both NIFTY and SENSEX still have enough room to correct further. It is indispensable to understand that over-bought and over-sold are just the conditions of the market based on indicators, they are not the only confirming tools to take the action as market may remain over-bought and over-sold for extended period of time. Hence, outlook still bearish for me.
Conclusion
The recovery in stocks price from lows on Friday along with rise in VIX is the case of reverse divergence which is not favorable for buyers. Market may not fall as sharply as we have seen going forward, but a lot has to be done before I conclude selling is overdone. Hence, I would prefer to wait patiently to consider the market in no-trading zone or may sell at higher levels.
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Stick to your trading model..!; Be a Savvy Investor..!!
Pankaj