Weekly Trend Report
- 28th October 2024
Week Gone By
The Indian benchmark indices experienced major losses during the week as the market extended its loss streak to 4 weeks. The decline was driven by the pressure from FII exodus, weak earnings and large scale selloff. The pressure in the broader market was more intense during the week as various indices continued to bleed. The global market also reflected a similar scenario, as weak earnings continue to weigh. Nasdaq was the only anomaly during the week.
Week Ahead
As the investors gear up for the coming week, earnings continue to act a significant trigger, affecting the sectoral trends during the week. Investors will also closely watch on FII and DII activity to gauge the market sentiment. Middle-East escalations will also act as a key trigger that could impact energy prices and volatility in the market. Key economic indicators to follow during the week: US job opening data, Japan Consumer confidence, US Q3 GDP data, BOJ’s interest rate decision and US core PCE price index.
Technical Overview
- The overextended markets demonstrated a continued decline for the fourth consecutive week.
- During the past five trading days, despite a few attempted technical rebounds, the Nifty Index has remained largely under sustained selling pressure that resulted in the loss of key support levels on the daily charts, as the trading range expanded significantly. The Nifty oscillated within a substantial 904-point range before culminating in a net weekly loss of 673 points.
- Additionally, volatility increased, with the India VIX surging by 12.23% to 14.63 on a weekly basis; any movement beyond 15.7 warrants caution.
- The week ended with the majority of broader market indices and sectoral indices exhibiting pressure on their uptrends, leading to a deterioration in momentum—a concerning development.
- Market breadth analysis reveals that the percentage of stocks trading above their 10-day and 20-day moving averages has now dwindled to single digits.
- Furthermore, the percentage of stocks trading above their 50-day moving average has fallen below median levels, currently reading below 20, with similar values last observed in March 2023 and 2024.
- For the first time since June 2024, the percentage of stocks above the 200-day moving average has also dipped below the 50 median levels. Sustaining these levels for a minimum of one month will be crucial in confirming a transition from the current bull market to a bear market.
- However, with stock participation at extreme lows, these trends indicate oversold conditions, hinting at the potential for a mild technical pullback in the near future.
- The upcoming week presents a truncated trading schedule; as Friday’s trading session will feature a brief ceremonial Mahurat session lasting only one hour.
- The Nifty has breached its critical support levels on the daily chart, specifically 20-week moving average positioned near 24700. This adverse technical landscape has lowered resistance levels for the Nifty to the range of 24500-24700.
- Consequently, any potential technical rebounds are likely to encounter resistance in this zone, implying that rebounds will be susceptible to selling pressure as long as the markets remain below this threshold.
- In light of the current technical setup, the market has entered a challenging environment characterized by a risk-off sentiment. It is imperative to prioritize investments in stocks demonstrating strong relative strength compared to the broader market. A selective and cautious approach is thus advised for the forthcoming week.
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