Tuesday I posted a mystery chart and asked you all to let me know what you would do. Buy, sell, or do nothing. Many said that it looked like a downtrend and that a neutral/bearish approach appeared best. I agreed.
So today, I want to reveal the full chart and share why I feel it’s relevant.
The original chart I shared was an inverted daily chart of the Equally-Weighted 10 Largest Nifty 500 Stocks.
Here’s the correct chart. What we see is that prices, despite breaking the uptrend line from their December 2016 lows are grinding higher, just 3% below all-time highs and above an upward sloping 200-day moving average.
Click on chart to enlarge view.
Given the current price action, I don’t see any reason to be short and would err on the neutral/long side. For now the weight of the evidence suggest that this is a normal consolidation within a long-term uptrend.
One thing that I don’t think people necessarily realize or appreciate is just how top heavy the Nifty 500 is. The 10 largest stocks make up roughly 40% of the index’s weighting, so the direction of these stocks and the broader market cannot be disconnected for long periods of time. It’s just math.
Given that this equally-weighted index is consolidating through time within a long-term uptrend, the higher probability is that it will eventually make new all-time highs. And if this index is breaking out to new highs, the broader market likely won’t be far behind.
So what do we need to get there? We provided our top-down view of the market and ways to profit from the current trends in yesterday’s first Member’s Only Conference Call of 2019.
Thanks for reading and let us know if you have any questions!