Key indices moving up without volume support

Monday’s euphoric opening and sideways movement continued for the second day. NSE Nifty gained by 35.20 points of 0.19 per cent and closed at 18,633.8. None of the sector indices gained or lost by over a percentage point. Nifty Media is the top gainer with 0.68 per cent, followed by FMCG with 0.59 per cent. The Nifty Metal index is the top loser with 0.91 per cent. All other sectoral indices closed with less than 0.50 per cent gain or loss. The India VIX is down by 2.34 per cent and settled at 12.01 per cent. Market breadth turned negative as the advance-decline ratio is at 0.94. About 91 stocks hit a new 52-week high, and 65 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, and Kotak Bank were the top trading counters on May 30 in terms of value.

The Nifty has formed an outside bar. It also traded in 87 points range. For the second day, the daily index range shrunk to less than 100 points. After the previous day's gap-up opening, the sideways action has not given any directional signal. A majority of price action is confined to the previous day's first-hour range. For the second day, it closed above the upper Bollinger band, indicating an extension of the trend. It has to come within the bands in the next two days. As mentioned on Monday, the Bank Nifty made an all-time high, but none of the components made an all-time high.

The Nifty Auto index also made an all-time high; again, none of the index components made an all-time high. At the same time, the FMCG index is making all-time highs every day, and only ITC has been driving up the Index for the last 2-3 months. This scenario is something strange. Index management and perfect rotation of stocks are going on in the market. The Nifty and Bank Nifty reached new highs without volume support. A price rise on low volume is generally not trustworthy. It actually indicates smart distribution. As the price is at a near all-time high, no indicator is showing strong bearish signals. The RSI and the MACD are in the overbought zone.

In fact, the domestic market is waiting for the US market’s reaction to the debt ceiling deal. Tuesday’s global market action will be crucial for the Nifty. As we are trading near high, and there are no specific bearish signals, continue with a bullish bias and ride the trend. Only a close a below the Monday's gap area will be negative.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)