Where are we headed?

To anyone who says that the market is some sort of an inanimate object, I'd suggest they interact with the market a little more and get back to me. As a market participant you will realise that just when you think you've figured out what's happening, the plot of the story changes. Similarly, just when everyone was beginning to get comfortable with the new highs in the market, the plot changed.

But how much has it changed? And can it reverse again?

Let's see!

So what's happening in Nifty 50? We identified the negative divergence that was at play at market highs. What followed was the result of that negative divergence whereby the index corrected to move below its September 2021 highs. Definitely not a good sign. What this has done is that there is now a trend of lower highs and lower lows in place. Of course, this is on the daily chart. Let's not jump the gun and call it a bear market just yet.

But lows start creeping in just the way they're doing right now. So it is important to track these moves.

Currently, the level that is of importance from the point of view of support is 16,750. The price has been halting at this level and is displaying some resilience at the moment. The indicator, however, has moved into the bearish regime. If the price does manage to hold these levels, we may see the index move into a sideways channel again, before momentum picks up pace. 16,750 is the crucial level, below this we're headed back towards the 2020 highs.

Click on the chart to zoom in.

Let's also take a look at the mid-and small-caps to see where they're headed.

Here's the mid-cap chart. A similar story played out here as well. While on the weekly chart one can identify the resistance clearly, the daily chart below is different. We saw negative divergence make its way to the chart and the price correction followed soon after.

Currently, the price has halted at the level of 28,700 which is the immediate level of support. The indicator is stuck in between, so not much of a signal coming from there. But 28,700 is crucial here. The price giving up on these levels is not going to be a great sign for the market.

Small-caps have been similar to mid-caps. They're currently holding on to the support of 10,550. This level has made its importance felt since September this year. The price has bounced back from here in recent past. If, however, this level is taken out, then we're essentially back to the 2018 highs. We'll be back to where Small-caps began giving up gains. Again, not a positive sign for the market.

Going by where the market is at present, its back to being messy, at best. We did get some trend resolutions in the recent past, but they have failed to hold their highs.

The sentiment in the market too isn't as bullish as it was before. But we also haven't seen a confirmed bearish signal yet. So we're back in the range of 'this is what we will do if x level is taken out'. And that's the only way to deal with a messy market.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team