All indices losing relative strength
As the market is entering into the counter-trend, it is better to book profits wherever possible and avoid fresh purchases
Negative Mkt Breadth
- 1,379 declines
- 1,195 advances
- 40 stocks hit a new 52-wk low
- About 149 stocks in lower circuit
- Weekly MACD is about to give a bearish signal
The benchmark and broader market indices were down and closed below their prior week’s lows. NSE Nifty was down by 123.30 points or 0.56 per cent and closed at 22,023.35. The Smallcap-100 was resilient on Friday with a 0.39 per cent positive closing. The Metal and FMCG indices were closed flat to positive bias. The CPSE index is the top loser with 2.47 per cent, and the PSE index is down by 1.71 per cent. The Auto and Energy indices were down by over 1.50 per cent each. All other sectoral indices declined by 0.05 per cent to one per cent. The market breadth is negative as 1,379 declines and 1,195 advances. About 149 stocks traded in the lower circuit, and 40 stocks hit a new 52-week low. HDFC Bank, ICICI Bank, ITC, and Reliance were the top trading counters on Friday, in terms of value.
The Nifty has erased Thursday’s gains. The price action is within Wednesday’s range for the second day, forming another higher-low candle. The Volumes were above average and highest after May 31, 2023. With the 0.56 per cent decline and higher volume, the Nifty has registered a distribution day. Now, the index holds four distribution days.
The index has closed below the prior week’s low, which is the first weaker sign after October 2023. A 2.61 per cent decline, with the highest volume after February’s first weeks, indicates weaker signals. As we suspected, the low-volume rally was not sustained, and broad-based selling pressure was witnessed. The weekly MACD is about to give a bearish signal. Even though the decline is just 2.6 per cent, the broader market indices declined more. The Niftyk-500 index closed below the 10-week average. The Smallcap-100 index closed with an 11.3 per cent decline from its recent high. The Midcap-100 index is below the 10-week average, trading at a 7-week low. All the indices lost their relative strength. The Market breadth is extremely negative except on Thursday. The index finally closed below the rising Wedge support on a weekly basis. In any case, if the index closes below the 50DMA of 21909 in the next two days, it will change the market structure to the uptrend under pressure. If the Nifty makes a new swing low by closing below 21860, the market will change to a confirmed downtrend. Below this level, the reasonably strong support is at 21667, which is a 61.8 per cent retracement level of the recent upswing. As the market is entering into the counter-trend, it is better to book profits wherever possible and avoid fresh purchases.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
