Weekly Market Recap

It was another week of upside though mild for at least benchmark indices on weekly closing, amid wild swings. Market seems to have digested the general election fully and waiting for next impending direction. GDP data declared this week is not very positive, we have slipped below china’s growth rate after two years of outperformance.

In the week gone by, the SENSEX added 279 points, or .71% to close at 39714 after touching a 40k level on Friday. Similarly, NIFTY gained 78 points, or .66% and settle at 11922 after crossing above 12k mark.

Current Outlook

I was waiting for this week closing to get some idea about impending direction of the market, but nothing significant happened. However, if we look through nuances, we found that on Friday, NIFTY hit the same level that we saw on election verdict day i.e. 12040 and suddenly break down from there, at one point of time NIFTY turned down more than 80 points that was enough to make the weekly closing negative. The issue we had last week like negative divergences on indicator are still intact (as depicted in chart below) that suggest recent upside lagging momentum. Technically, momentum is the leading indicator which get reverse before the price.

In addition, the weakness in the market breadth at higher level remains persistent, except 1 or 2 days of strength that we witnessed last week. Another noticeable facts, the knee-jerk reaction that we saw on Friday from 100 points up on NIFTY to 80 points down suddenly also suggest that smart money or market makers are exiting or distributing their holding at higher levels which is not a good sign, but lack of commitment to follow through towards down side is slightly positive. Hence, we need to wait patiently for some more time to get some idea about the future course of direction of the market, however, based on chart patterns I strongly believe that upside is limited on benchmark indices.

Conclusion

There is bifurcation between the price and the indicators and it seems to be hard to imagine a decline or advance of some magnitude, it probably won’t happen the way we are expecting, it’s a plan. I am alert for a short-term price top. Nevertheless, the fundamental backdrop offers no encouragement that a longer-term turn-around to take place soon, and the technical structure in that time frame is not very positive.

Stick to your Model…!; Be a Savvy Investor..!!

Pankaj