The Nifty 50 and Nifty 500 are back at the top of their multi-year range right as we’re starting to see signs of exhaustion in various global markets.
Here’s the Nifty 50 exceeding its former all-time highs as momentum diverges and closing back below it. While not a major topping signal, from a tactical perspective it’s what we’d expect to see from a rangebound market like the kind we’ve had for the last year plus.
Yesterday in our monthly charts post we reiterated the Small-Cap divergence that’s weighing on Indian equities and keeping a cap on the Nifty 500. If breadth was strong we wouldn’t see these type of near-term reversal signals so often, but it’s not.
Click on chart to enlarge view.
Here’s the Nifty 500 also approaching resistance at 9,925 as momentum diverges. Not a setup we’d want to be buying.
It’s happening globally too.
Here’s the Euro Stoxx 600 failing at new highs as momentum diverges. While its longer-term breakout is intact, a pullback of several percent or a correction through time is a very logical expectation.
Even the strongest stocks in the world, in this case US stocks, are reversing from their all-time highs as momentum diverges.
Needless to say, this evidence suggests some near-term weakness after a strong run by the Nifty and other equity indices over the last few months.
Emerging market equities topped two weeks ago and now it looks likely for other markets to correct as well.
The strongest markets will correct through time, rather than price, so over the next few days/weeks, we’ll be looking for stocks showing relative strength to buy once a more attractive entry presents itself.
Thanks for reading and let us know if you have any questions!