Weekly Market Recap
It was quite the undecisive week for the market as NIFTY remained hovered in a narrow range, though the week started off with some weakness yet bulls managed to hold the last week solid gain, in fact, closed this week marginally higher than last week closing
In the week gone by, the benchmark SENSEX added 175 points or .30% to close at an all-time high at 58305, similarly NIFTY gained 45 points or .26% to close at 17369. While BANKNIFTY posted a negative weekly closing with a loss of .21%.
Current Outlook
The dominant feature on the chart of NIFTY is that the price has deviated abnormally higher above the 50-day SMA (green line) and in the past year this signal or configuration has resulted in some sort of pullback quite persistently. I have enunciated those deviations on the chart below with blue arrows on the top. Moreover, this deviation in price has coincided with overbought conditions among indicators in the lower panel of the chart as enunciated by the vertical blue line. This is quite a simple, effective, and proven configuration in the past year in suggesting the pullback or reversal in the price at least of some magnitude.
Furthermore, the given setup is lying perfectly in September which is supposed to be the weak month as per the statistic at least 60% of the time as I stated in my last blog.
The market breadth again showing a sign of concern as it has started to deteriorate on the back of continued narrowing of leadership. It is also worth noting especially at the time of the above-mentioned setup. It is prudent to pay extra attention to price movement in the coming week if the price drops more than 2% with heavy volume, this most likely signals that the stocks or index have topped in the near term and the correction of some magnitude is expected. Hence, the outlook is to be cautious.
Conclusion
While the longer-term uptrend for the markets remains in place, however, the given setup doesn’t appear to be propitious of the bulls. Hence, having a game plan to buffer against any further potential weakness would be prudent at this juncture.
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Keep Analysing…; Be a Savvy Investor..!!
Pankaj