Weekly Market Recap

In my previous weekly note, I had expected the market to correct at least to some extent if not complete meltdown. Very much on expected line, this week market started off with pull back and drifted lower till Tuesday, however, sharp reversal witnessed before the monthly expiry as a result both NIFTY and SENSEX had managed to recoup the weekly losses.

The week went by remained as flat as it can get. The benchmark SENSEX closed with a meagre loss of 72 points, or .19% at 390067, and NIFTY closed almost flat with a gain of only 1.85 points, or .02% at 11754.

Current Outlook

This week its look like as if a lot has happened but, in fact, nothing has happened as far as indices are concerned, so as my outlook is still the same. Since last 2 weeks I have been talking about possible double top formation on NIFTY and SENSEX and my conviction became stronger based on the last week action as explained in last blog. Last week, I mentioned about the shooting star candle which is negative in nature and we have seen the expected implication this week. Despite, sharp recovery and strong upside momentum both NIFTY and SENSEX closed precisely at and below the last week candle respectively (see the chart below). This suggest the possibility of double top formation is still intact unless NIFTY closed above recent peak established in last week.

The VIX (volatility Index) this week cooled off a bit to 21.72 after spurting to 26 level while indices remained at same level. I think, in another sense VIX has a room to spike up again. Most importantly, the market breadth remained quite weak while market bounced off sharply, this means a lot. Only top ten heavy weight stocks have achieved a weightage of 60% in NIFTY that means variation in these 10 stocks on either side will impact the direction of NIFTY significantly, which is not constructive in nature in long term. The moment smart money or market markers will realise that these stocks are quite expensive on valuations they will collapse immediately so as the indices. Hence, outlook is not very positive.

Conclusion

The chart above best illustrates my negative outlook. Price is going higher, while indicators diverge — since the February 2018 top and the top two weeks ago. I still expect some corrective action to make a very accelerated up trend adjust to an angle that is not so steep.

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

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

Pankaj