Saturday, 11 August 2018

Nifty at new highs, but enough good reasons to call it a mirage

The Indian stock market was euphoric this week as it touched new highs on every single day and the market breadth too improve somewhat with smallcap and midcap shares also participating in the rally. 

Our indices were resilient in spite of negative global headwinds regarding tariff wars, sanctions on Iran and political slugfest among the US, China, and Russia.

Once the earnings season gets over, Mr. Market will hopefully adjust to the global realities and will be in line with the global in indices, which have started to move lower. 

The S&P500 index is nearing a double-top, which can be a big signal for global equities. In case the double top turns out to be a long-term reversal, then entire global bull markets would be at risk. 

Bull markets are currently ignoring the confrontational attitude of the US with the rest of the world, which could lead to major disasters. One must always remember that “The bulls prosper in peace and the bears in turmoil.” 

The current new-high anatomy of the market is very peculiar and the internal health of the market is far weaker than the January 2018 top. This is evident from the fact that the number of shares making 52-week highs are currently 36 against 162 during January 2018 top. All-time highs currently are only 27 against 95 during January 2018 top.

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