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Tuesday, September 27, 2022

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The Market Is In No Mood To Relent Yet

New swing highs were punched out and all that but that did not really come as a surprise to anyone. It was more or less expected and the fact that the weekly expiry and long weekend also did not influence the players to book out of long positions proved that the confidence in the market continued to remain higher. We did see a choppy time but, overall, the market maintained an upward bias through the week. The first chart carries the intra-week moves.

The top finish is encouraging because of signals that can now emerge in the longer time frame charts. Checking the monthly chart of the Nifty 50, I find that the Nifty has just given a new all-time high close. The April 2022 high at 18,170 looms ahead as both a target as well as a resistance. But the way things are right now, I believe a move past 18,000 will ignite fresh sentiment waves. That said, one has to mention that the main resistance trendline is being reached. The current rise is equal in points to the last one but longer in time. See the second chart.

On the monthly charts, we have a solid rising candle for August (in progress, of course) that is seeking to overturn the slight bearishness of the last three months of red candle formation. But what is still noticeable is the limited nature of the decline in relation to the extent of the rise. See the third chart. It is still just about 25% of the rise. I have discussed this aspect earlier article and opined that it could be one of the reasons why we may still have another down leg pending. But as of now, the market is giving us no signs of the same. As ever, we should trade what the market is saying about itself rather than what we think it ought to do.

On the chart, a small horizontal line is marked across the prior cluster of OHLC data and we find the cluster point to be around 17,500 area. Hence the Nifty pushing and holding past these levels now would be a major positive development. While the crossing of prior swing highs is what most people look for, I also consider the crossing of ‘value areas’ such as the one mapped here also gives us a good clue about market intent.

Supporting the index in its attempt to continue higher is the largely positive trend maintained for the quarterly results. About 57% of stocks showed positive profit trends compared to 39% for negative trends out of some 2,375 results declared so far. There weren’t too many misses among the larger stocks and hence the overall market trend has remained positive as well.

A sense of disquiet emerges from the high readings of the RSI on the daily chart. The indicator hit 80 on the daily chart and those are indeed over-bought levels. The last time when we saw the RSI at these lofty levels was back in September-October 2021.

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