Weekly Market Recap
In yet another strong week indices continued to scale up to new highs and the rally appears to be unscathed so far. As I mentioned last week, the precipitous move on weekly and monthly looks vulnerable, but on the daily chart, NIFTY still has enough room to trigger a blow-off kind of rally. And it seems that that rally is taking place as the angle of ascent is now getting steep (see the chart below).
In the week gone by the benchmark, SENSEX had a whopping rise of 2005 points, or 3.57% to reach 58129. Similarly, NIFTY surged 618 points, or 3.7% to reach 17323. BANKNIFTY also rose in tandem and gained 3.18%.
Current Outlook
This week’s hypodermic move in NIFT seems to have resolved negative divergences that appeared in the lower panel of the chart last week. Unequivocally, we have been witnessing an unprecedented rise in the stock market. Week after week NIFTY is making a new high. This week, the leadership came from heavyweight RELIANCE, the stock is breaking out to a new high, and the technical configuration suggests that it has enough room to gain before it appears vulnerable on the chart that eventually shall fuel the further rally in NIFTY. In addition, few mid-cap stocks are also breaking out from multi-year consolidation, if break out sustained they may rise stupendously. This will make the market breadth stronger, but there is no harm to watch out for these issues before jumping out for any conclusion.
Contrary to this, seasonality indicates some sluggishness or a minor pullback in the month of September. I don’t take much from this statistic as this has been true 60% of all the time and a 40% margin of error is enough not to rely much on this data. However, it can help us to visualize and correlate the data; especially at the time when the advance is quite vertical which has always been vulnerable to a sharp pullback. Although, the market seems to be unstoppable but it’s getting frothy, therefore it is prudent to keep seasonality in mind.
Conclusion
While the seasonality shows considerable weakness in this month, but the trend is fairly solid. I interpret this to mean that stocks that are breaking out from multi-year consolidation can be considered to make an entry. That’s a good thing as far as the market is rising; however, be cautious as technical support is way below from current levels and that would be enough to damage the portfolio vehemently.
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Be Patient…; Be a Savvy Investor..!!
Pankaj