Indian markets turned bearish for the third straight week as the U.S.-China trade uncertainty continues. Oil prices rose 9% this week overshadowing investor optimism around the US FED’s rate-cut signals.
On the economic front, India imposed higher tariffs on 28 US products in retaliation to Washington’s withdrawal of key trade privileges. The US Federal Reserve left the interest rates unchanged but held out hopes for a rate cut soon. European Central Bank chief Mario Draghi has also indicated that the Bank could cut interest rates again or provide further asset buying to support the EU economy.
The U.S. and Iran moved closer to a military conflict after Iran shot down a U.S. military drone near the Strait of Hormuz. The two countries are already in a war of words following the recent attacks on two oil tankers, as well as earlier attacks on oil tankers — that Washington has blamed on Iran and its allies.
Nifty Long Term
At last some little progress on the downside after 3-4 weeks of sideways action. The Bearish Divergences are having its effect on the Nifty.
- The RSI & its EMA has started diverging after the negative crossover that happened last week.
- PPO has topped out and turned over. Crossover yet to happen, next week possible.
- Notice how the selloff normally accelerates once the RSI(2) goes below 30. It happened in Nov 2016, Feb 2018 and Sep 2018. This week we closed at 22.48.
Willit happen this time also 🙂
Nifty Intermediate Term
There is plenty of action for intraday traders this week. We have 4 days of 100+ points move in the Nifty. On the Daily charts, the distribution on Top continues. Few important aspects to support the thesis –
- A type of divergence known as Negative Reversal can be spotted between RSI(2) and Price. Theoretically, Negative in nature happens during the pullback in a downtrend.
- RSI(7) turning down from the bear market boundary of 50.
- PPO negative crossover below zero line.
- Nifty reversed from the Breakout level of 11850. Previous support now turned resistance.
Nifty Short Term
The distribution at the top is more clearly visible on the intraday charts of Nifty. The price breakout above the channel line at 11800 could not sustain itself and had fallen back inside the channel. This normally has negative connotations for the price and it wouldn’t be a surprise if Nifty slides down to 11550 in the next week. Then it will also make the Nifty close below the 11630 mark on the Daily which I am keenly watching for the down leg to start with gusto.
NSE Breadth had deteriorated more in this week with the market fall. Now it stands at the lowest level in the last many months. The market is held back by the buying in some select large-cap stocks whereas the Mid & Small Caps are decimated.