Market has been range bound for more than a year and finally broke to all time high in November 2022 but was not able to rally. What's going on!!!! Where is the bull rally? Let's understand the basics....
Nifty weekly chart displays the range bound action and recent breakout to all time high. MACD appears to be rolling over which is not a good sign.
Nifty daily chart is displaying divergence between RSI and MACD which has resulted into market pullback. However, Will this pullback result into a bounce or melt-down remains to be seen. Divergences are not very reliable and can provide many false signals or continue for long time frames.
Both above charts are not providing any meaningful clues as both of them are based on technicals, but both below charts are based on market internals.
What are market internals?Unless market internals improve, how can the market go up without the stocks which makes up the market!!! And if market does go up then that means a handful of stocks are driving the market higher which is not sustainable.
Below NSAD chart displays that number of stocks advancing is less compared to declining stocks on cumulative basis. In other words, more stocks are declining hence the trend of NSAD is down.
What are market internals?Unless market internals improve, how can the market go up without the stocks which makes up the market!!! And if market does go up then that means a handful of stocks are driving the market higher which is not sustainable.
Below NSAD chart displays that number of stocks advancing is less compared to declining stocks on cumulative basis. In other words, more stocks are declining hence the trend of NSAD is down.
Below chart of Nifty stocks above 50SMA and 200SMA clearly displays that more stocks are below their respective 50day SMA and 200day SMA. Market always has a hard time to rally when both trends of stocks above 50SMA and 200SMA are down.
Summary:
Market attempted a breakout to all time high but was unsuccessful and now we know the reason behind it. However, it can still make another more convincing attempt as New year rolls in but for any rally to be sustainable market internals have to improve else it is a clear indication that the rally will not be sustainable hence extreme caution is needed. Better to be prepared than be sorry.
Market remains range bound with bullish bias, be cautious...
Market attempted a breakout to all time high but was unsuccessful and now we know the reason behind it. However, it can still make another more convincing attempt as New year rolls in but for any rally to be sustainable market internals have to improve else it is a clear indication that the rally will not be sustainable hence extreme caution is needed. Better to be prepared than be sorry.
Market remains range bound with bullish bias, be cautious...