Weekly Market Recap

Well, NIFTY touched new landmark of 12000 on vote counting day that revealed BJP came back in power with majority, at one point of time NIFTY was up whopping 300 points, but couldn’t sustain at higher level and eventually closed in red. In my last two blogs, I wrote, based on technical set-ups, despite positive election outcome the upside in market is limited and market behaved precisely in line with my expectation.

In the week gone by, the benchmark SENSEX surged 1503 points, or 3.96% to close at 39434. Similarly, NIFTY gained 436 points, or 3.83% to settle at 11844.

Current Outlook

Post-election outcome, at least market has clear visibility of political stability for another five years which indeed is big positive at macro level. Political stability is the key for the government to take measures to maintain the fiscal discipline along with no need to take populist step in impending budget. Fundamentally, at macro level the picture seems to be good.

Technically, the dominant feature on the chart is the negative divergences on the indicators across the broad along with market inability to sustain at higher level, we might have seen a false break-out above the double top on NIFTY and SENSEX both. The negative divergence doesn’t always guarantee for a pull back, but still there is fair probability of pull back of at least some magnitude. For quite long time, the VIX was elevated at higher level on the back of country’s big event which has now cooled off significantly from the level of 28 to 16. Need to see next few days whether VIX falls further or remain at the same level as in bull market VIX tends to stay below 14.

Moreover, on voting day when NIFTY touched the 12k mark the market breadth was not impressive perhaps, that’s a reason market couldn’t sustain there, however, after a long time on Friday, I saw market breadth was quite strong till closing in conjunction with indices closed at higher levels. That’s a strong set-up. In contrast, NITFY closed in the vicinity of previous two highs that could turn out to be a triple top formation. Hence, we should wait for next week closing for new setup and outlook.

Conclusion

In recent times, I have been pushing the theme of double top which is still intact on closing basis despite rallied this week. The only difference is it would be called off triple top rather double. Perhaps, in coming week the picture would be slightly clear. As of now, the current technical configuration are pointing towards less upside at least on indices, though, specific stocks may continue to do well.

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

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

Pankaj