We enter a “decisive” week; Based on the technical setup on the chart, the market could consider the start of a definite directional trend this week and any trend it catches could sustain at least for the short term. .
There is also something important to understand about the US Debt Ceiling crisis. The debt ceiling is the maximum amount that the United States can accumulate by issuing bonds. The debt ceiling was created under the Second Freedom Bonds Act of 1917 and is also known as the debt limit or statutory debt limit. If the U.S. government’s national debt level spikes above the ceiling, the Treasury Department must use other special measures to pay government obligations and spending until the ceiling is raised. return. scenario scenario: US government defaults on debt.
A decision on the matter is still awaited as leaders negotiate to write off debt but also limit spending in the process. Negotiators are said to be narrowing a two-year spending deal that would raise the debt ceiling for the same amount of time, extending it past the 2024 election. It’s also worth noting that the deadline for this is January 1. June, the agreement is expected to go into effect in the eleventh hour that the House has left for a Memorial Day weekend; Monday is a holiday in America.
Back to the market, the indices are at the peak of the breakout and closing at very decisive levels. The US market also has a similar setup; either the market will make a breakout next week or any retracement will put an intermediate peak in place sometimes. Either way, it is more likely to initiate a directional move in the market as the major indexes are poised to move out of their consolidation zones. The market could start the new week on a positive note, levels 18590 and 18700 are likely to act as resistance; support will come at 18300 and 18150.
Weekly RSI at 61.35; it marked a 14-period high as an uptrend. It remains neutral and does not show any difference to the price. The weekly MACD is rising and sustaining above its signal line. pattern Analysis of the weekly chart shows that CONVENIENT closed below the major double top resistance at 18604; this is the main high because the index could not break through this level and make a breakout. In December 2022, Nifty retraced after a failed breakout attempt to form an intermediate high of 18887.
In the coming days, two things need to be watched closely. The first would be Nifty’s ability to pass 18600 levels; if this happens, it is set to test the lifetime high of 18887.
While options data shows that the Index is attempting to open up some upside possibilities for itself, any possibility or failure to move past 18600 will lead to a corrective decline for Nifty. .
In summary, there is a high chance of continuation of the move in the direction when the Index is near the decisive levels. All in all, we strongly recommend that despite the fact that the market is at the cusp of a decisive move, the move has yet to happen and it is likely to go either way. One must not go overboard in building over directional positions until a clear trend emerges. While continuing to remain selective in the access markets, a cautiously positive outlook is recommended for the coming week.
In reviewing the Relative Pivot Graph®, we compared various sectors with the CNX500 (NIFTY 500 Index), which represents more than 95% of the free-floating market capitalization of all stocks. listed.
Relative Turnover Graph (RRG) analysis shows NIFTY Consumption, 100 Midcap, Automotive, Financial Services and Real Estate in the top quadrant. Convenience banking has also made it to the top list quadrant and we can expect these groups to outperform the broader NIFTY 500 Index. The FMCG is also in the leading quadrant but due to the rapid loss of relative momentum, it is about to roll inside the weak quadrant.
The IT index continues to be weak inside the lagging quadrant along with the Metals and Media index. Other groups in the lagging quadrant are the Services, Commodities and Banking PSU sectors.
The NIFTY Pharma and Energy metrics are firmly placed inside the improvement quadrant. Important Note: The RRGTM chart shows the relative strength and momentum of a group of stocks. In the Chart above, they represent relative performance against the NIFTY500 (Broader Market) Index and are not to be used directly as buy or sell signals.
Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and Founder of EquityResearch.asia and ChartWizard.ae and based in Vadodara. He can be reached at [email protected]