Wait for the buy signal

Updated: Dec 19, 2016, 11:19 IST | Alex K Mathews

It is a pressure cooker situation in the few days before the curtain falls on this year

Demonetisation and subsequent confusion and queues do not happen only in India, A man shows 100 Bolivar notes while queuing outside Venezuela’s Central Bank (BCV) in Caracas in an attempt to change them. Venezuelans lined up to deposit 100-unit banknotes before they turned worthless, but replacement bills had yet to arrive, increasing the cash chaos in the country with the world's highest inflation. The move was followed by violence and protests and yesterday, Venezuela rolled back the move
Demonetisation and subsequent confusion and queues do not happen only in India, A man shows 100 Bolivar notes while queuing outside Venezuela’s Central Bank (BCV) in Caracas in an attempt to change them. Venezuelans lined up to deposit 100-unit banknotes before they turned worthless, but replacement bills had yet to arrive, increasing the cash chaos in the country with the world's highest inflation. The move was followed by violence and protests and yesterday, Venezuela rolled back the move

Nifty closed weak at 8139.45 on Friday. It is likely to remain under pressure in the days to come. As the major technical indicators are yet to give a buy signal, we have to wait to enter into the market at around 8125, 8005 and or at 7948. After testing these key supports, the market may consolidate at 7950- 8200 levels. If the Nifty could manage to close above 8249 for more than five days then we can expect further upside, but, chances are remote. Sustained selling by FIIs and low support from domestic institutional investors kept the market in a very narrow range. Retail participation is also very low these days due to uncertain market conditions.

Equity markets hit
The Dow Jones is on a bullish mode, but it is overbought zone. The daily, weekly and monthly charts indicate the overbought situation. The Dow has support at 19659 and there are possibilities that it could test this level in the short term. After testing this level, the Dow can easily move above the 20000 mark. The S&P 500 VIX is hovering below 13 also suggests this. US FED decision to increase the interest rates hurts global equity markets, especially emerging markets. Further, the US FED could raise interest rates in the coming quarters. It can also hurt the sentiments of global equity markets and commodity markets.

Companies in the segment of exporting, oil marketing and producing companies are likely to get support from the market in the short term. Banking Nifty is still to give a buy signal. It has support at 10065 and resistance at 10373. Sideways trends can be expected in the short term.

Last week India’s WPI came out, as expected it stood at 3.15 per cent for November against October at 3.39 per cent. India’s Industrial Production declined drastically at 1.9 per cent in October compared with October 2015.

Bullish but corrective
Macro data, which is expected to come this week is too low compared with previous weeks especially from US side. Retail sales YOY, unemployment rate, GDP YOY, Service PMI, Balance of Trade and inflation Rate can be expected from the EU Zone. The lone important macro data which is set to come out from India is Foreign Reserve.

Crude is still bullish, but it is in corrective mode. Short term support for crude lies at $49.87 per barrel. It has the capacity move above$55 in the short term. It made a high at $54.54 recently but came off from highs due to the strong dollar. According to analyst expectations, crude is likely to move up in the short term because OPEC and non OPEC countries unanimously decision to cut production to support prices.

Alex K Mathews is the founder of www.thedailybrunch.com

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