Weekly Market Recap
Finally, the market broke the eight-week winning streak and corrected sharply from its high which has relieved over-bought conditions to some extent. Indices opened slightly higher from last week’s closing and then persistently drifted lower till the end of the week.
In the week gone by the benchmark SENSEX lost 1282 or 2.14% to close at 58765, similarly, NIFTY shed 321 points or 1.8% to settled at 17532.
Current Outlook
For the past three weeks, I have been writing and talking about the exogenous deviation of the price from its moving averages and that configuration generally leads to a pullback of some magnitude as it has been the reliable indicator in the past. I have seen it working this way for years, so, at some point, one realizes that there is enough data to accept a phenomenon, even if the momentum or sentiments are quite strong. Ideally, the higher reading in deviation turns into a sharp pullback up to the 50-day SMA as enunciated in the chart below. If that is the case this time, NIFTY has enough room to correct from the current level. In addition, I expressed my concern about elevated VIX last week on the note that this indicates an untoward outcome is about to happen and we have seen the outcome.
On the flip side, we have witnessed elevated downside readings on volume and net advance-decline that suggest me selling exhaustion in the short term as we saw some stopping downside action which may lead to some sort of bounce next week. However, that will only be confirmed after Monday’s action, meaning we should look for either sideways churn or higher prices to start the week.
Hence, as of now, the outlook seems to be utterly bewildered with the possibility of some bounce.
Conclusion
Although, in the short-term NIFTY appeared to have relieved hypodermic advance to some extent, however, on a weekly and monthly chart the advance has still overstretched which alerts us for further downside. In a best-case scenario, we should expect to see churn more than a strong rally early next week.
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Be Patient…; Be a Savvy Investor..!!
Pankaj