Weekly Market Recap

Another week of degringolade for the market, means there was quick deterioration or breakdown of circumstance or price. Finally, NIFTY lost 11K mark which looks like a crucial, but not to me, it’s just a figure on the way down and I was expecting  this kind of behaviour for quite some time. If you have been reading my blogs then you would agree on that and if you were short in the market then you needed to be patient enough to encash that gain. This is what I have been saying to my clients since last few weeks and months just “be patient” sooner or later market will decline significantly. As old saying “hard work and patience always pay”.

In the week gone by the benchmark SENSEX lost 764 points, or 2% closed at 37118, and NIFTY plunged 286 points, or 2.54% settled at 10997.

Current Outlook

Well, there is lot to write about, however the prominent thing which I found and have been observing since the decline started is relation between VIX (volatility index) and NIFTY or SENSEX. Before this recent decline, we have seen two major corrections, one is in February 2018 and second is in September 2018 as depicted in chart below. Both the time, VIX blow off to the level of 24-26 in a short span, which is supposed to be a reversal signal of downtrend in bull market. As VIX also tells about the sentiment and market in-general moves opposite to the sentiments. In last 10 years, since current bull market started off after the correction of 2008, NIFTY made a significant bottom when VIX touched the level of 24-26. However, this time the scenario is totally different, despite seeing a correction of 1000 points in NIFTY, VIX is not elevated. That’s not a good news for bulls. It suggest that market has a long way to decline before it get reversed or made a significant bottom.

Nevertheless, indicators on the lower panel of the chart below appears to be oversold at least for short term, but that doesn’t really means we should expect a significant bounce off immediately, but there is possibility which is less. Technically, trend seems to have reversed and it’s not a prudent decision to go opposite to the trend. Hence, outlook continues to be not in favour of bulls.

Conclusion

There is no question that trend has changed from up to down as I have written in past blogs the best barometer to gauge the behaviour of market specially in earning season is how the stock reacts on their earnings. In this earning season we have hardly found the winners mostly are losers, despite declaring a better than expected profit. Moreover, long-term chart is also pointing downward direction. As I said, there might be some bounce whose possibility is less, but if that happens then another leg down will start.

I welcome any feedback or suggestion you may have about the content of this article.  

Be patient..!; Be a Savvy Investor..!!

Pankaj