In our last post on 27 Dec 2018 “Bull market setup, Now?” we discussed the slow arrangement of the EMAs in a bullish setup. The subsequent crossover of Full STO and PPO also followed but it looks like the momentum on the upside is missing. Not only that we also got a negative crossover on both of them yesterday. Bullish case weakened.
On the daily chart below, I have plotted the inverse VIX and Nifty together. The beauty of this chart is the visualization of greed and fear, which are essentially the two emotions driving the markets, in a single window.
It is a close only line chart and we can observe a rising wedge formation.
“The Rising Wedge is a bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range narrows. Rising wedges have a bearish bias.”
The lower trend line is placed in the zone of 10700-10800. A close below 10700 will be bearish and a crossover on the VIX will confirm the bearish bias.
On the weekly charts, both the shorter term PPO (5, 10, 4) and longer term PPO (12, 26, 9) are on the verge of generating a negative crossover. Additionally, this crossover is happening below/near the ZERO line, which makes it more bearish in nature.
In a nutshell, markets are on the fence. Avoid fresh bullish bets. Maintain SL on existing long positions.