Another rejection, No clear direction...

After a huge rally from extremely oversold levels, market was hitting against old resistance area and was rejected immediately on high volume. Can it hold current levels? Will it attract investors? Most importantly can it sustain the move!!!

Not much has changed in below chart. McClellan index in bottom portion of the chart appears to have crossed EMA(59), however both EMA(59) and MA(100) continue to descent. Also EMA(59) is below MA(100). In TOP portion of the chart, it appears that MA(100) is just below MA(200) and market is sitting right on MA(200). In short, in recent weeks more stocks were advancing than declining which caused the market to shoot higher. BUT lets NOT get carried away, the pattern appears to be very similar to earlier pattern and if the sentence "History often repeats itself" holds true then we shall expect further decline in weeks/months ahead. On other hand, there is a slight possibility of market continuing its BULL trend, however it is less likely.

Nifty was rejected as soon as it tried to break through resistance zone on high volume which is NOT a good sign. Will Nifty be able to find support near MA(200)?

We can see a LONG TOP tail on the candle bar on weekly Nifty chart as soon as Nifty hit the resistance zone which suggests that market might be heading down in coming weeks.

As of now, we do not have a clear market direction. Market is simply playing with investors from last few months and moving in a very wide range (5400-6300). Nifty has to break through 6300 area to continue its BULL move or break below 5400 area to start a BEAR market. In time market will display its cards but until then, its wise to stay on sidelines. Current environment is too volatile and does NOT offer good risk/reward ratio.

What does it mean for our Investments?

• Mutual Funds - If you are still invested in equity funds then use this bounce to exit the market. If you are in debt/bond funds then keep an eye on them and be ready to exit and cut your losses (NO more than 8-10% loss). Considering current economic outlook, equity markets and bond markets, both may take a hit causing significant damage to your investment portfolio. The best place to park our capital for now would be liquid funds or cash/CDs.
  
• Stocks - ONLY invest in very convincing patterns and DO NOT forget to have STOP LIMIT in place.
  

Market appears to be range bound yet vulnerable, hence be cautious...