Weekly Market Recap
Last week’s solid rebound held, and the indices continued to gain in the second week. Though this week was truncated with only three trading sessions, still price nicely held up their gains as the earning season is starting from the coming week, which will further define the next course of direction for the market.
In the week gone by the benchmark SENSEX gained 841 points, or 1.43% to close at 59832, similarly, NIFTY surged 239 points, or 1.38%, and closed at 17599. While BANKNIFTY gained 1%.
Current Outlook
The dominant feature on the chart below is the NIFTY has given the break-out above the falling trend line which is certainly a bullish sign as this indicates the potential change of trend from down to up. Most importantly, the market breadth remained strong throughout this week which supports the further rise in prices. I view this as a bullish sign for the stock market. The Breadth indicator measures the degree of participation that favors the bulls. All this is happening just before the earning season kicks off suggesting satisfactory results from the companies.
Moreover, the VIX is consistently falling and reached the lowest level in five years almost close to the all-time lowest reading in 20 years. There are two key takeaways from this, one is market is quite complacent and not expecting anything negative as a result the NIFTY may continue to rise for a time being. It is quite possible that the VIX may remain low for a quite long time and the price continues to ascend. And the second is the NIFTY is about to make a final cardinal top, consequently, the price may correct sharply sooner than later. So far, history is in favor of the latter, hence I will label this breakout as ‘questionable”.
Conclusion
I would argue there is still ambiguity, it is prudent to keep analyzing the market from the cliff and react when needed. The major movement in NIFTY can only occur with the variation of IT and Banking stocks. So keep an eye on these stocks to get a decent entry on either side.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj