Weekly Market Recap
After Having a decent correction for five consecutive weeks until the last penultimate week, finally, the bulls were resuscitated at the lower level to find their way towards their previous all-time high that occurred in July. In fact, the NIFTY has reached the vicinity of its previous high and fell short of less than 1% from its peak.
In the week gone by the benchmark SENSEX surged 1211 points, or 1.85% to reach 66598, similarly NIFTY gained 384 points, or 1.98% to settle at 19819. While BANKNIFTY added 1.62%.
Current Outlook
Until last week, I was expecting the market to correct further, but the foible disappeared sooner than expected as indices turned around incisively from the lower level and resumed their uptrend after forming some kind of a base. Unequivocally, this looks bullish and gives an impression of rallying further. However, I think, still we should wait patiently before rushing to buy as the sharp moves on either side are occurring abruptly. Therefore, it is indispensable to consider alternative scenarios.
One probabilistic scenario for NIFTY is to form the double-top formation (see the chart below) and then suddenly drop significantly, or what if the market is more bullish than you’d expect? The best approach at this juncture is to actively consider alternative points of view. It is extremely important to think about how you would adapt to one of those alternative scenarios to protect your portfolio in a risk-on scenario.
However, there are myriad possibilities and one more is a countertrend rally which we have experienced this week. If the countertrend rally failed, that opened the door for the bears to resume their decline. The bears had some help in that instance from the counter move. In addition, there is a divergence between long-term and short-term charts as both suggest different outcomes.
Furthermore, the VIX has been hovering at an extremely low level for quite some time showing complacency that favors the bulls, but at the same time, it opens the doors for the bears to take the charge that can easily cause the ruckus in the market.
Conclusion
I want to point out that there is enough ambiguity at this juncture. So, it is prudent to keep the position light and wait patiently unless the market indicates a decisive move in either direction. Meanwhile, temperance is the key.
Feedback, comments, suggestions, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj