Weekly Market Recap
After posting five consecutive weekly gains the market ended the week flat-to-down as investors digested the whopping vertical gains amid volatility and negative news about inflation. As the earning season comes to an end the heavyweights may hover sideways to keep the bias at bay.
In the week gone by the benchmark SENSEX lost 131 points, or .21% to close at 61663, similarly, NIFTY was marginally down by 42 points, or .23% to close at 18307. While BANKNIFTY still managed to inch higher and gained .71%.
Current Outlook
This week we saw the first sign of diminishing upside momentum, until mid-week my biased was bullish with extra caution, however, post this week’s market action my biased has lost ground and getting more cautious. Though pause after a solid vertical gain is quite healthy and obvious, still there are some serious signs which we shouldn’t ignore. First, not having strong market breadth has been a cause of concern as was the case last week which has further weakened this week. And the momentum indicators which were rolling up until last week have turned down, since last year they are perfectly oscillating between the high and low range along with the frequent change in the price.
As I shared my observation last penultimate week that the inability to offload the shares by strong hands amid so much negativity may cause the price to rally further. It is indispensable to note that sometimes, it can take several weeks or months, or a year before the effects of higher inflation or tight monetary policy are felt. Seeing the stock market come off its lows is exciting. While it may be tempting to adopt the “buy the dip” mentality, however, we need to keep the big picture in mind as well.
A stock market that appears to be strengthening in a time of economic uncertainty may not be sustainable. That’s not to say we shouldn’t buy; it just means that, if we want to add positions to our portfolio, do so knowing that economic fundamentals may not be aligned with the stock market. Certainly, we’re going through an inflationary period, interest rates are rising globally. Interest rates are probably going to rise more. Perhaps, we got a hint of that from not-so-strong market breadth. We don’t know that may be a long way off.
Conclusion
Regardless, given current uncertainties, it’s best to keep the capital protected. Have a risk management strategy in place—protect your winning trades using stops, recognize when your emotions influence your decisions, and, be disciplined. Ultimately, our goal is to protect the portfolio. Being patient, and sometimes not doing much makes you a smart trader and investor.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj