Charts indicating bearish trend
The Weekly and daily RSI entered into bearish zone; The weekly and daily MACD show an increased bearish momentum; The KST and TSI are also in the bearish setup
The equity market gave up its strength with the weak global markets and intensified selling pressure. NSE Nifty declined for six straight sessions and registered one of the biggest weekly losses. The Nifty was down by 478.40 points or 2.67 per cent last week. The BSE Sensex is also down by 2.5 per cent. Nifty Midcap-100 and Smallcap-100 indices lower by 1.8 per cent and 2.1 per cent, respectively. All the sectoral indices ended lower with across-the-board selling pressure. Nifty Metal and Realty were the top losers with over six per cent. PSU Bank, Media declined by five per cent. Bank Nifty, Auto, and FinNifty closed with two per cent to three per cent declines. The market breadth is in favour of declines. FIIs sold Rs4,508.91 crore, and the DIIs bought Rs12,397.75 crore worth of equities during this month.
The Nifty closed below the rising trendline, which is drawn by connecting March 2020 lows and June 2022 lows. As we expected, this is the first sign of long-term weakness. The benchmark index failed to move the prior day's high and formed all lower high and low candles. The weekly range increased by 583 points compared to 415 points last week. It registered one of the biggest falls in recent times. The week opened with a gap down, and the 50 DMA acted as resistance. Now, it closed all the short and long-term averages. It closed below the 200 EMA. Importantly all moving averages are in the downtrend. The 200 DMA support is placed at 17368, which is also near the Budget day low of 17353. The 50-week average is also at the same place at 17339, which is like to be a crucial support zone. The index must bounce from the 17368-421 zone of support. Otherwise, it is going to be under the complete bear grip. A short-term bounce towards the Wednesday gap area or 20DMA 17770-800 zone.
On the indicators front, the Weekly RSI (45.55) has made a new low, which is bearish. The daily RSI (34.92) is also entered into the strong bearish zone. The weekly and daily MACD shows an increased bearish momentum. The JDK-RS-Momentum is sustaining below 100, and the Relative Strength has been declining for the last week. Importantly, the Elder impulse system has formed five successive bearish bars. The KST and the TSI are in the bearish setup. It also declined below the Anchored VWAP support.
For the first time after October 2022, the Dow Jones index has formed a bearish bar on the weekly Elder impulse system. It has broken the Triangle on the downside and closed below the prior minor low. The S&P 500 index is also broken the rising wedge, which is bearish. The Dollar began to rise after a reasonable correction. This is going to impact on Equities and Commodities across the globe negatively.
As mentioned earlier, the India VIX was at its lowest levels in recent times. It was expected that any spike in volatility would adversely affect the indices. It is already shown its impact last week. On these conditions, the markets must be approached on a highly selective. Reducing the position size and applying risk management principles to protect the capital is the only way to be in this market.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)