Weekly Market Recap
This week, we saw a solid rebound in the prices from the lows and that was quite enough to recoup last week’s losses. However, the upside momentum seems to be alleviated until the week concluded. Almost all the sectors participated in the rebound and halted at the key resistance level.
In the week gone by the benchmark, SENSEX gained 764 points, or 1.33% to close at 58191, similarly, NIFTY added 220 points, or 1.29%%, and settled at 17314. BANKNIFTY also moved in line with the major indices and gained 1.4%
Current Outlook
Technically, an interesting and important configuration is being set up on NIFTY. As we can see in the chart below, the NIFTY almost rebound from the middle of the range which I was expecting, and the rally halted at the erstwhile support and turned into a resistance horizontal blue line which is coinciding with the 50-day SMA. Moreover, the few indicators in the lower panel also rolled down precisely from the middle of the range, and a couple of them like MACD and stochastic unable to cross above the center line post-rally. The given setup clearly suggests a classic bear market rally.
Whereas improvement in market breadth and alleviated VIX, indicates buyers get resuscitated and may further fuel the rally after a succinct consolidation. However, we need to wait to get veritable evidence for the next leg of the rally. Furthermore, the statistics for this quarter from October to December go in favor of bulls.
On Monday, the market may have a negative reaction on account of global cues, but we have to see how long and strong the negative reaction would be. Subsiding negativity in the coming week would be an important clue for the buyers.
Conclusion
Whether the recent rebound was the bear market rally or a downside reversal; would be clear in the forthcoming week. I think this week’s high and low will act as support and resistance unless proven otherwise. Breaking on either side may invite the follow-through with greater magnitude. Hence, one can take a position with a tight stop as we have an opportunity for both sides.
Be Disciplined; Be a Savvy Investor..!!
Pankaj