Weekly Market Recap
It was quite a week for the market, referring to media headline “Market has a new address, SENSEX climbed 50K”. Certainly, the market had a boisterous move and managed to scale above all expectations. However, the reverse was as quick as possible and SENSEX shed 1200 points from its all-time high, eventually broke the longest weekly winning streak and posted a first weekly negative reading in last 12 weeks, but marginally.
In the week gone by the SENSEX lost 156 points, or .32% to close at 48878, similarly, NIFTY was down by 61 points, or .43% settled at 14371. While BANKNIFTY lead the decline and lost over 3% after marginally gone up from its previous high.
Current Outlook
Last week, I mentioned about the possibility of forming a cardinal top by the market just before the covid-19 vaccination drive flagged off and the sign of exhaustion may lead to pandemonium which has been the case this week. Though, COVID news is no news for the market, still selling was conspicuous in first two days but effervescent rally came in right in the middle of the week to scale up the indices at new summit that eventually rather precariously vanished with the week.
Investor sentiment is one of the most powerful forces in the stock market. Euphorically steep upside enunciates the greed in the market which generally leads to downside reversals. Post this week action it has become a strong possibility that market has formed a cardinal top. Though it is difficult to say whether we are going to see a direct reversal or sideways behaviour, but history says vertical up move mostly ended up with sharp reversal. Technically, the market is in over-bought zone and this week negative divergence among indicators became more pronounced that suggest this week corrective action may continue in forthcoming sessions.
I am not saying that strong bull market is over, but it should temporarily be interrupted by corrective action or sideways move to digest the big gains as market is over-extended. As I wrote last week VIX is making a base at around 18-20 level which had been the higher readings in previous bull market that suggest fear and concern are on the rise. Typically, if a sell-off or correction is going to develop, it does so during that time. Furthermore, market has done the enough job to invite the retail participation in every pull back that is prerequisite for deeper correction.
Conclusion
The big up-move are quite tantalising especially when they are quite steep but at the same time, they are pernicious in nature that required paramount of patience and discipline for short-term traders to not be the victim of these embezzled move. And strong sentiment can make you buy at high and stuck there. So be patient before you dive for buying.
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Be Patient…; Be a Savvy Investor..!!
Pankaj