⦿ Trend: Uptrend under pressure
⦿ Momentum: Positive but worsening
⦿ Breadth: Strong
⦿ Bias: Positive
⦿ Swing: Upswing (100)
We are in a long-term bull market (positive bias) that in an upswing on strong breadth, but worsening momentum in an uptrend under pressure.
Trend → Uptrend under pressure
⦿ Most broad indices are now in an uptrend under pressure. Nifty Next 50 & Midcap 150 stay in a confirmed uptrend.
⦿ Most sectoral/thematic indices are still in a confirmed uptrend.
⦿ FMCG is the only index in a downtrend.
Momentum → Positive but worsening
⦿ All broad indices other than Nifty Next 50 have positive & worsening momentum.
⦿ Number of indices having positive & improving momentum is decreasing, with Auto, Oil & Gas, Energy, & Pharma still strong.
⦿ FMCG, Finance, PVTbank & Media stay with negative momentum.
Swing → Upswing
⦿ Majority of indices are in a confirmed upswing. Microcap 250 is in an early upswing. FMCG is in a confirmed downswing.
⦿ Both Nifty & Smallcap 100 are in a confirmed upswing. Swing Confidence is 100, which means that the portfolio can take the maximum permissible open risk.
⦿ The overall weekly Swing Temperature stays cool, which means that new swing positions can be taken till the Swing Confidence also supports.
Market breadth → Strong
⦿ Breadth with regard to extension: With the % of stocks above 50-day MA & 20-day MA staying above 50, & the % above 10-day MA also crossing over the midline, the market breadth is again strong. The % of stocks above 200-day MA stay in the sustainably bullish 80+ range, after seeing a downward trend over the past 2 weeks. Stocks 15% up in 5 days, which were above their extension thresholds prior to the shakeout of 12th Feb, have cooled down now.
⦿ Breadth with regard to participation: Net breadth as per 4% advance & decline, after turning negative briefly, is back in the positive territory with multiple double-digit advances. As the the norm after a shakeout, Market breadth volume has dried up for now.
Bias → Positive
Currently, the bias is positive. It has been positive since April 2023 (with a couple of neutral days in late October 2023), that makes this bull run 10+ months old now. Just for context, the post-Covid bull run (as per NNH) was 20 months long (June 2020 to February 2022).
⦿ Majority of indices have stayed above the 50-day MA for past 3 consecutive days.
⦿ Net New Highs have stayed positive for past 3 consecutive days.
⦿ On lower timeframes, neither the 65-day NNH nor the 20-day NNH are positive for past 3 consecutive days.
Situational Awareness for CW 07/2024
This week saw higher than expected inflation data from the US, which meant that the Fed rate cuts expected in May shifted a couple of months ahead, & the market started pricing this news in. So far, this has proved to be more of an over-reaction, that, nonetheless, lead to the mild shakeout we witnessed in the Indian markets.
These shakeouts are getting more frequent, but less intense, as far as the recovery is concerned. The first shakeout of this bull rally was the most severe, & is the only one to have decisively breached the 50-day MA. It almost had two legs, & took a considerable time to resolve. All the shakeouts after that breached only the 20-day. Last week’s shakeout, while it resolved with a V-shaped urgency, did breach the 50-day.
After last week’s shakeout, the markets resumed moving higher, that too on decent participation. Continuing for past 3 months, the bull swing still continues in a late stage in the mid, small, & microcap space, & has lasted beyond most traders’ expectations, which is the hallmark of a well-established cycle in the market.
Most portfolios created over the last 3 months had to exit their holdings that were being trailed with short-term moving averages (10 or 20). Very relatively strong stocks stayed on, as they did not go decisively below their 20-day. Longer-term trails (50 & above) are still intact. This is a trade-off between 2 mindsets: the willingness to see a deeper drawdown in order to ride the trend longer, or the unwillingness to let go of open gains in an oblong market.
This is neither the time to get scared & sit out of the market, nor take highly aggressive bets. You neither have to jump right in the middle of the battlefield, nor totally watch from the sidelines with your sword in your scabbard. Take-calculated-bets.
The shakeout left me about 25-30% invested, & I’ve added on some new positions to get about 70% invested now. Would like to see the newer positions get risk-free, before going all in.
If this hypothesis of more frequent shakeouts holds on, then I’m expecting another one in the coming 1-2 weeks. I understand that another ‘shakeout’ from here might be even deeper, with more & more probability of getting converted into a proper pullback/correction. I don’t know when such a correction will come, so I keep on participating, ready to give back some gains, in exchange for the possibility of getting even more gains. I’m not letting go of the market till it stops me out.
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Sir how do you come to this quadrant data, like momentum decreasing etc. On what basis do you quantify them?