Mkt turning weaker, sideways price action expected

THE Nifty closed on the negative bias on a neutral policy day. After three successive positive days, the Nifty declined by 56.40 points and settled at 16,238.20. On a monetary policy day, the Banknifty closed flat to a negative tone. All the sector and thematics indices were limited to small moves on either side. The IT index gained by 0.30 per cent and the Auto index by 0.24 per cent. Media and Realty indices were down by 0.96 per cent each. Smallcap and Midcap indices closed flat to positive. The VIX declined by another 2.06 per cent and ended at 12.6075.

Technically, the Nifty formed bearish engulfing candle at a lifetime high is a negative sign. As we discussed yesterday, the Doji candle got the confirmation for reversal. The benchmark index just closed below the upper Bollinger band, which indicates that the market entered another round of consolidation. As the RSI reacting from the 70 zone also displayed this fact. On a weekly timeframe, it formed a strong bull candle by rising 475 points gain or three per cent. During the consolidation, the Nifty may test 16,030 level, which 38.2 per cent retracement of the previous upswing. Though every longer-term indicator is showing bullish strength,weekly RSI negated the negative divergence, and the ADX (22.81) shows relatively better strength. As the traders want to book the profits at a higher level, the index shows some negative signs on 75 minutes chart. MACD histogram shows bearish momentum. RSI is declining from the overbought condition. The much broader benchmark index Nifty-500 shows a negative advance-decline ratio, which the broader market turned weaker even after the over 3 per cent rise in one week. We may see sideways price action in the market next week.

(The author is financial journalist, technical analyst, family fund manager)