Happy New Year to Everyone…!
Weekly Market Recap
Finally, the market ended the week and year on a positive note. Though NIFTY has recovered sharply from its recent low of last week yet down significantly from its all-time high made in October, nevertheless, indices still managed to clock off the year with a double-digit gain.
In the week gone by, the benchmark SENSEX surged 1129 points or 1.98% to 58253, Similarly, NIFTY gained 350 points or 2% to 17354. And BANKNIFTY also managed to gain 1.79% in tandem with the broader market.
Current Outlook
Last week, I wrote about the formation of a falling channel on NIFTY and expected the index to remain in that channel with the possibility of bouncing up to the top of the channel after the shakeout. This week, NIFTY managed to reach the top of the range channel as enunciated in the chart below.
As I mentioned last week after the shakeout prices tend to move up sharply and this has been the pattern on NIFTY in recent times. The top of the channel may act as resistance as this has been coinciding with the 50-day SMA (green line). Although the indicators in the lower panel are rolling up that indicates the further rise in the price, however, unless NIFTY breaks decisively above that level it is hard to expect the follow-through. But the possibility of breakout is building up; unlike last week when the outlook appeared to be gloomy and bleak. In addition, the market breadth has improved incisively in the last two days and the VIX has also restrained to the lower level downplaying any major pullback at least in the near term.
Putting some light on inflation. Many times, perceived problems can be bigger problems than actual problems. As we have wrapped up 2021 and heading into 2022, there’s really no denying that inflation is a problem at both the consumer and producer levels. We should understand that inflation eats into the future earnings of growth companies. So, as a result, growth companies tend to perform poorly on a relative basis when inflation is spiking. And as I have mentioned in my last penultimate weekly note that few of the consumer stocks have broken the long-term trend line that demonstrates a noxious picture on the chart.
Hence, given the ambiguity outlook is bewildered.
Conclusion
Technically, the picture seems to be slightly positive in the near term, but need some more evidence before jumping on the long side. And keep in mind that inflation may be the problem that could result in the tapering of liquidity by the central banker everywhere which is untoward for bulls. Hence, patient and temperance are the keys.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj