Current Week Holds Critical Cues For Near Term Market Direction
The tussle between liquidity and fundamentals continued unabated last week, with the bellwether index struggling to retain momentum around the upper Bollinger Band channel.
The stochastic oscillator on the weekly charts is ripe for a bearish crossover too, suggesting a possible retracement towards the 20-week moving average mark, which presently stands at around 600 points below current levels.
With disconcertingly high fuel prices driving up inflation in staples, the RBI is likely to begin pulling back some of its extraordinary liquidity measures sooner than later. Until then, a deep cut remains relatively unlikely.
We also seem to be forming yet another Doji Star on the monthly charts. If it happens, this would be the second such instance in the past 4 months. A Doji Star on the monthly charts has long been a reasonably sound indicator of an impending momentum reversal.
The immediately foreseeable direction for the NIFTY seems downwards, with strong support at the 15K mark. If it fails to hold at these levels, we will most likely see a sharper fall of another 1,000 points or so. This week holds some critical cues for the near term direction of the equity markets as a whole.
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