Weekly Market Recap

Last week I wrote that Death Cross over appeared means that 50 SMA (daily simple moving average) crossed down below 200 SMA. This week market started off on positive note on Monday, but continuously moved down for the rest of the week in line with my expectation, consequently both Sensex and Nifty almost eroded the last week gain.

In the week gone by,  the Sensex lost 257 points or .73% before settle at 35199, similarly, Nifty was down by 155 points or 1.46% to close at low point of the week at 10526.

Current Outlook

In my last few blogs I have stated that we have entered in a bear market and the delineation of this week correction further strengthen my conviction of bear market. In last three weeks we saw a nice rally and I believe this week that short rally is being used to liquidate the stock at much possible higher levels by smart investors or market makers. This is in conjunction with the fact that despite we witnessed a precipitous rally from lower levels in last three weeks, but VIX (volatility Index) a prominent indicator to gauge the complacency, never close down below 17; Ideally VIX stays above 17 in bear market, now at 19.16. Moreover, Market Breadth (net of advances and declines) which tells about the overall health of the market didn’t improve much while market rallied, but declined significantly on reversing.

This is not a infallible indication of bear market, but it is a fairly reliable one. So far as I remember , and If I compare the charts then I found the similar configuration – in 2007-2009 bear market, though I was novice that time. And, there is fair probability that I may be wrong, but for now, I will assume the worst.

Conclusion

If we assume that we are in bear market, we must assume that technically short term bullish setups are less likely to have a positive resolution than they would in a bull market. It is more likely that we will break down. The point is that we need to adjust our bias in favour of our perception of the market trend, don’t make bets against the trend.

 I welcome any feedback you may have about the content of this article.

Keep Analysing..!; Be a Savvy Investor..!!

Pankaj