Weekly Market Recap

Few weeks ago, I wrote that based on weekly chart price action, market (Indices) may go further up, so as indices (Nifty and Sensex) traded much on the expected line up to this week.

The Sensex ended the week with a gain of 313 points, or .83% to settle at 37869, and Nifty added 68 points, or .60% before closed at 11429. Banknifty outperform the major benchmark indices and gained 428 points, or 1.55% on the back of strong rally in ICICI bank and Axis bank post their earnings. Market assumed that both banks have disclosed all of their bad assets.

Current Outlook

Technically, based on Thursday and Friday action on Nifty, Sensex and Banknifty, I am expecting a nice pull back or correction next week. After a long time, I found negative divergence between price chart and supportive indicators is placed that indicates a nice pull back. Divergence is more pronounced on banknifty, so relatively banknifty may correct more than Nifty and Sensex.

Pull back in Indices means large caps will fall, but question remains; which area of pocket will lead the correction if it does prevail? I think, technically, private banks are well set to lead the short term correction after having a sharp vertical up move.

However, as I wrote last week, stocks which have consolidated in last few months and shown a sign of revival may continue to do well in next few weeks, despite correction in major indices. Hence rotation of money may continue in order to change the leadership.

Conclusion

This week correlation between indicators and price have changed, but so far the market has not begun behaving badly. The market is overbought, price is potentially forming a top, and the negative divergences are unanimous. I am expecting weakness next week, and it could last a while.

I welcome any feedback you may have about the content of this article.

Keep Exploring..!!;  Be a Savvy Investor..!!

Pankaj