Last week we witnesses an extraordinary historic event which probably sealed the fate of EU going forward. How does this will affect our markets? What will be short term effect and long term direction for our markets? Let's take a look...
At this juncture, it appears as if market is poised for the pullback we were expecting for many weeks. BREXIT event has triggered an important short term effect on the market. It will not be a surprise if market pullbacks to MA(100) near 7700 area. However, the key thing to observe is McClellan Index. As long as, McClellan index remains above or near EMA(59) then use this pullback as a low risk buying opportunity, BUT WHY? Well for that you need to understand what does McClellan Summation Index really represent! Please go through "Reading Sensex" section and it will be clear.
Daily Nifty chart is clearly displaying resistance near 8300 area and market appears to be in retreat. Will MA(50) provide support? We doubt it will but you never know. RSI is not yet in oversold conditions which means market has room to drop further. Also PPO could not make a NEW HIGH suggesting a pullback for now.
Weekly Nifty chart suggest that market could find support near 8000 area or drop down to 7700 support area. RSI has just managed to come out of overbought condition.
What affects can we anticipate from BREXIT event? (pure speculation):
Overall, expect wide ranges and higher volatility for next couple weeks/months.
Market remains bullish but expect pullback and be cautious...
- Short term market volatility for next few weeks as more information unfolds
- Capital flow into Dollar and precious metals which in turn means capital outflow from Euro, Pound. In other words, FDI's will pull out of Indian market causing short term liquidity crunch providing an awesome low risk buying opportunity. This might also drive further Rupee devaluation.
- Central banks across the globe will start confidence building by some way of pumping more money into their respective economies, which in turn will eventually drive stock market to NEW HIGHs.
Overall, expect wide ranges and higher volatility for next couple weeks/months.
Market remains bullish but expect pullback and be cautious...