Weekly Market Recap
The market once again wobbled and reversed the bounce that occurred last week as a result stocks and indices are approaching retesting the recent lows. The downside momentum was quite strong as NIFTY lost last week’s gain just in the last two trading sessions and more importantly, there was no sign of recovery or buyers didn’t show off to bid at lower levels.
In the week gone by the benchmark SENEX lost 673 points, or 1.13% to close at 59135, similarly, NIFTY shed 181 points, or 1.03% to settle at 17412. While BANKNIFTY again led the decline after showing resilience in the past two weeks.
Current Outlook
Last week, I wrote that based on previous price behavior NIFTY may retest the 200-day SMA this week my prophecy came true as NIFTY has fallen below the 200-day SMA to retest the previous low. The distinguishing factor between now and then is last time when NIFTY corrected to 200-day SMA the VIX attained the highest value in the past two years, however, this time the VIX is at the lower end of the range that strongly suggests there is an offloading of the shares by the big investors, perhaps that is the sign of sustained bear market. Moreover, the technical indicators in the lower panel rebounded lower from the middle range after being relieved of the oversold conditions last week.
In addition to this, though NIFTY is retesting the lows, many handfuls of stocks have fallen below their 200-day SMA as I mentioned “nothing good happens below 200-day SMA”. This is one of the barometers to recognize the trend of the stocks, we are more likely to experience the sustained advance when the price stays above 200-day SMA which no longer seems to be the case now.
Furthermore, the market breadth is persistently weak and the stocks making new lows are quite more than reaching new highs. Hence, the outlook doesn’t seem to be favorable for the buyers.
Conclusion
The given recipe is indicating a sustained bear market going forward which could be quite painful. There is a possibility of sharp spikes in intervals, but I doubt, unless there is a significant change in above mentioned conditions, I think the deep correction is likely.
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Be Patient; Be a Savvy Investor..!!
Pankaj