Weekly Market Recap

This week, market (Sensex and Nifty) started off on a positive note and Nifty gave a solid and crucial break-out above over-head resistance at 11000 (about which I have been writing for quite some time), however, break-out couldn’t sustain for more than a day, in fact followed by intense selling on late Thursday and Friday as it can be seen in the chart below. Eventually, Nifty close down below the break-out level (11000), although weekly closing is still positive.

In the week gone by, the Sensex gained 77 points, or .21% to close at 37546, and Nifty added 50 points, or .46% to settle at 10943.

Current Outlook

It is important to talk and analyse about false break-out as false breakout often followed by above-average price trend in the opposite direction of the original signal. A classical example we saw on last Friday, where the temporary joint upside break-out was followed by nasty decline. Note that the recent rally failed to sustain above the horizontal resistance line as shown red in chart below. Volume was a bit thin on breakout day versus the volume on turned down day below resistance. Most importantly, the market breadth was not commensurate in line with the market direction on breakout day, while breadth was highly negative on reversal day. Combination of these factors suggest that smart money or so called market makers are selling or distributing their holdings at optimum higher level. This is a classical example of distribution as well along with false breakout. Although, I have been negative on the market for quite some time, but these events makes the conviction stronger.

As I wrote in my previous blog, I would not be a buyer in this market until I see the enough weight of the evidence to turn bullish. Hence, I think, outlook is not positive and I would remain bearish.

Conclusion

The market is still behaving in a bearish manner. Nifty made an attempt to move up, but it just gave up to downside. Technical indicators are also indicating downside, so I have to believe that some genuine or significant corrective action is coming soon. Hence, I would suggest don’t keep over leveraged positions and always be prepared to execute your selling discipline.

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

Be alert..!; Be a Savvy Investor..!!

Pankaj