Weekly Market Recap
Last week, based on combined applied analysis on daily and weekly chart I concluded that NIFTY likely to trade sideways with negative biased. And, this week market continued to trade negatively, in fact fell lickety-split in last two days, but once again bounced sharply late Friday. Furthermore, as I have written in last two blogs the tussle between demand and supply continued, however, supply appeared to be more dominating at higher levels.
In the week gone by the benchmark SENSEX lost 933 points, or 1.84% to close at 49858, similarly, NIFTY shed 286 points, or 1.91% to settle at 14744. While BANKNIFTY lead the downfall with a loss of 3.76%.
Current Outlook
The momentum rules everything. Until, last week there was veritable evidence that showed waning upside momentum in terms of divergences among indicators with respect to price action and that colluded with quite apparent supply at higher level. This week, we saw rapid shift in momentum toward downside. Although, buyers still seem to be dominating force at around 14500 on NIFTY and managed to recoup half of its losses, however, sign of minor weakness has emerged post violation of rising blue trend line as enunciated on the chart below. Most importantly, the rising trend line is coinciding with 50-day SMA that should act as strong support. As of now, NIFTY has closed below this major support. However, there is horizontal support (green line) which is still held up very well. That’s why I called it minor sign of weakness.
Admittedly, in a strong bull market, these signals haven’t hurt the market gravely and penetration below the trend line is the platitude event. Given the strong or less bullish bias in the market currently and strong demand available at lower levels, this may not lead to another bear market, but a pullback or possible correction is likely, if NIFTY not managed to resume its uptrend.
Moreover, the health of the indicators on weekly chart are not good, from overbought to negative divergences; the indicators tell us to beware as few fresh negative cross over happened this week. Furthermore, one interesting and indispensable observation that the VIX (volatility Index) which has been hovering between 18-25 since past few weeks didn’t show up this week despite the fall in the market. That suggest two contradictory outcomes, either big investors or institution are oblivious about the current fall and simply waiting to buy belligerently at lower level, or VIX has enough room to zoom which may lead to torrential fall in the market.
Hence, given the ambiguity and silhouette on the chart, its prudent to wait for next course of action by the market to understand the disguised outlook.
Conclusion
Now we have intermediate- and long-term warning signals in the form of violation of trend line on daily chart and negative cross over among prominent indicators on a weekly chart. Hence, we should be prepared for more downside ahead, or wait patiently to resolve these issues before rush in to buy.
Feedback, comments, suggestion or questions are welcome at below comment section or at [email protected].
Be Patient…; Be a Savvy Investor..!!
Pankaj