Weekly Market Recap
Instead of getting into the consolidation or side-ways move, the market preferred to choose a different path and bounced-off as sharply as it fell last week. In the week gone by the benchmark SENSEX gained whopping more than 1500 points to closed at 41141, similarly, NIFTY surged 437 points and settled at 12098.
Current Outlook
The precipitous recovery that we saw this week was undoubtedly quite impressive and tantalizing. However, I would name this rally an automatic reaction followed by climactic action on the back of short covering. To my understanding, I would say the market has defined the upper and lower range in between this week’s high and last week’s low for next few days as I depicted in the chart below.
Although, the momentum itself is a strong indicator which seems to be in the favor of bulls post solid recovery, however, the nuances of technicality suggesting otherwise. The indicators after having a bearish or negative divergence for quite long became oversold in the aftermath of plunge, consequently that led to the unexpected sharp recovery in the market.
Nevertheless, the stock prices and index have recouped most of their losses but the indicators halted precisely at the mid-way that’s not a propitious scenario for the bulls as it is a sign of alleviation in momentum that would eventually downplay the significance of bulls.
Ipso facto; the outlook gradually seems to be turning in favor of bears or in the best-case scenario would remain side-ways.
Conclusion
Technically, the automatic reaction followed by climactic action is the beginning of sideways movement which tends to provide quite volatile sessions between upper and lower band of the range unless next course of direction is identified based on understanding or anticipating the forthcoming earnings. For the time being I believe the market has formed a cardinal top.
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Keep Analyzing..!; Be a Savvy Investor..!!
Pankaj