Weekly Market Recap
It was another wild week for the markets, as the turmoil continued to spread in all areas of the market. After falling below 200-day SMA NIFTY witnessed a torrential fall but somehow managed to bounce from the lower level to close above the crucial level of 17K yet weakness prevailed throughout the week.
In the week gone by the benchmark SENSEX lost 1145 points, 1.94% to close at 57989, similarly, NIFTY shed 312 points or 1.80% to 17100. While BANKNIFTY still closed over 2% despite recouping half of its losses.
Current Outlook
For the past few weeks, I have been expressing my concern about the likely deep correction in the market. And this week the long-term trend signal turned out to be bearish. NIFTY fell decisively below the 200-day SMA on the daily chart and below the 50-week SMA on the weekly chart. I have written in brief, why staying above the 200-day SMA is important to define the momentum and trend of the market in general.
Recent selling pressure emerged from the finance sector and spread to other areas of the market. In fact, selling pressure was broad enough to push the major indices into negative territory, which signals a bear market. A bear market signal does not always lead to an extended decline, but it does indicate an above-average risk for stocks. Although, in the past year the same signal emerged in sep-22 when NIFTY fell below the 200-day SMA, however, this time it is distinguished from the previous in terms of VIX which I mentioned in my last note.
Although the market has shown a long-term bearish signal, it is important to note that the sharp spikes have been the characteristic of this market due to which whipsaw signals have been generated keeping this in mind don’t rush to buy or short the stocks. Moreover, the indicators in the lower panel have turned up after touching the lower levels suggesting a bounce of some magnitude is likley.
Conclusion
Sometimes markets trend, sometimes they oscillate and sometimes they simply frustrate. I would venture to guess that trading in this market may fall into the frustration basket where trend following and momentum strategies may suffer because big moves are failing to extend and develop into trends. The sharp contra move may continue to appear while sliding lower.
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Be Patient; Be a Savvy Investor..!!
Pankaj