Weekly Market Recap
In this truncated week, the market opened lower with sluggishness and continued to drift lower till it closed on Wednesday. Last week, I mentioned that the rally was interrupted at the crucial level and the then configuration didn’t appear to be favorable for bulls. As expected, it appears that the market has sensed something untoward that is causing the sluggishness.
In this short week gone by, the benchmark SENSEX lost 1108 points, or 1.86% to close at 58338, similarly, NIFTY shed 308 points, or 1.74% to close at 17475. While BANKNIFTY was a bit resilient with a loss of less than one percent.
Current Outlook
The condition which I noticed and wrote about last week is pretty the same by now. The indices drifted lower and in contrast, VIX remained hovered at lower levels causing the reverse divergences. The purpose of noticing these subtle changes is not to get caught in the weeds by staring only at the outer surface. Sometimes it’s difficult to focus on what is working best or which signal is indicating a better picture, but we can’t afford to completely ignore one over others. However, at times one signal works best over others.
Therefore, given the condition and technical setup my worries on long-term charts are back that downsized in the recent past. In fact, things are getting quite untoward, eventually, things may just go haywire. However, the big positive picture on the below daily charts is the price is well above the 50-day and 200-day SMA. It has been a tricky market to judge. Can we move higher from here? Perhaps, yes… this is a short-term view, but the big picture is also changing. What I think is more important is understanding the shifting sands underneath our feet, regardless of what the next few weeks bring.
Most importantly, the earnings season has kicked off that will provide investors or traders an early glimpse of what is about to come. It is indispensable to note how the stock price reacts post their earnings, whether the disappointing earnings are being ignored or taken seriously.
Needless to say, we need to be very careful holding individual stocks into their respective earnings reports — i.e., this particular quarter might be even trickier than normal. Instead, we should consider waiting for companies to post numbers, gauge the market reaction and then make an assessment; was the reaction positive or negative, and is there a post-earnings opportunity to take a long or short position?
Conclusion
There are enough warning signs that should mean an opportunity for prices to rebound, even if only for a short time, just to surprise the crowd to the greatest extent possible as smart money only wants to exit at the higher level that doesn’t mean we should ignore the warnings. Hence, we should enjoy and analyze the market from the window rather than being on the surface.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj