Weekly Market Recap
After having a sideways to upward movement in the past two weeks NIFTY has turned upside down that resulting into renounced its last week’s gain. Though, NIFTY started the week on a positive note on Monday, but couldn’t sustain and continued to drift lower throughout the week. Almost all the major sectors participated in decline while banking fell the most.
In the week gone by the benchmark, SENSEX lost 1050 points, or 1.73%, and slip below the 60K mark to close at 59636. Similarly, NIFTY shed 337 points, or 1.87% to settle at 337. While BANKNIFTY fell 2%.
Current Outlook
Here is the abstract of my last weekly note:
“The current setup of NIFTY on the daily chart is looking bullish provided the 50-day SMA is being tested and respected, however, there is a high probability that the market may remain sideways as breadth is not looking quite strong for the lopsided gain. While the setup looks quite vulnerable to me on weekly chart which is the serious cause of concern.”
The dominant feature on the chart is NIFTY has broken the support of 50-day SMA (green line) and the indicators in the lower panel which were appeared to be rolling up last week have turned down abruptly just before they cross-over as we can see in the chart below. The market breadth which didn’t support last week’s recovery continued to diminish significantly. It’s going to get harder and harder to find solid winners as there are fewer and fewer to pick from. This is quite bearish in nature.
Coming back to the weekly time frame, it looks noxious and disconcerting that suggests there is enough room to fall before it gets oversold. The level of 15700 on NIFTY doesn’t look surprised to me. However, the VIX remained alleviated despite the fall in prices but there are two takeaways from this, one is complacency is still there means pullback may revamp the big movers once again. Second, there is enough room for the NIFTY for deep correction before VIX gets the upper end of the range.
The ambiguity on the chart on different time frames was quite evident until last week which seems to have resolved this week and both are suggesting lower prices in the coming week. If somehow NIFTY manages to jump above the 50-day SMA with better participation in the next few sessions, then upside may resume else pullback of some magnitude is on the card. Hence, the outlook doesn’t seem to be favorable for the bulls.
Conclusion
In the best-case scenario, I can expect sideways consolidation, however, given the speedy contraction of participation among the major market indexes the pullback on prices may continue.
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Be Patient; Be a Savvy Investor..!!
Pankaj