Weekly Market Recap
Last week I wrote, that the rally faced a stiff headwind at the crucial resistance level. NIFTY failed to cross that resistance which is falling 50-day SMA (green line) and moved sharply lower this week. This is hardly surprising because the Market Regime is bearish and bearish outcomes are more likely in such an environment.
In the week gone by the benchmark, SENSEX fell 1465 points, or 2.63% to the 54303 level, similarly, NIFTY lost 383 points, or 2.31% to 16201. BANKNIFTY also fell in line with major indices and lost 2.24%.
Current Outlook
After making a double-bottom low and an oversold low in the past two weeks, the NIFTY had a pretty impressive rebound effort, which included a few really strong breadth days. That got a lot of attention and suggest a “breadth thrust” signal of various favor for the bulls, as I mentioned last week the breadth is changing quite frequently. But the rally stopped at a resistance level that had been prior support levels in the past that coincided with the falling 50-day SMA, as we can see in the chart below. And, after several days of rebound, it has now fallen back away from that test of the resistance.
Now the bearish outcome is once again reflected among the indicators in the below panel as they have been rolling down from the center line or middle of the range which is an ideal scenario in the bear market and suggests price may continue to fall further after resolving oversold conditions. NIFTY is not far away from the previous two lows and in a typical bear market, the double-bottom or triple-bottom are only the conditions to be considered but can be easily failed.
Conclusion
Things are looking iffy, and the given configuration is not propitious for the stock price unless NIFTY gets over its downtrend. Moreover, inflation seems to be a serious problem going forward which may have a significant depleting impact on the stock prices. I strongly feel there is more work yet for the market to do to dismantle the excess liquidity built up in the last two years after covid.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj