There was quite a bullish sentiment prevailing in the Indian markets for quite some time. The primary reason was the bounce back in the US markets. Yesterday, India’s CPI data was released which recorded a spike in inflation from 6.71% in July 2022 to 7% in August 2022, while today (a few minutes ago) US CPI for August 2022 came in at 8.3% on a YoY basis which surprised the markets. Although it is a downtick from 8.5% in July 2022, still investors were seen liquidating their equity holdings in the blink of an eye.
The result led to a very sharp fall in the which fell from the day’s high of 32,631.5 to the CMP of 31,940, depicting a cut of 2.11% from the highs. The same intense selling pressure was witnessed in the broader market and the tech-heavy . The selling spree spread to other asset classes as well with and both seeing a heavy cut of around 1.47% and 1.9%, respectively.
Image Description: 5-minute chart of the SGX Nifty
Image Source: Investing.com
A sudden hit to the global market sentiments has also been reflected via a sharp cut in the , which plunged from the day’s high of 18,142.5 to a low of 17,825.5, translating into a fall of around 1.74% or 317 points from the high. In my yesterday’s article, I mentioned that there was a clear double top in the making in the index which is a reversal sign and therefore bulls should have been cautious.
However, as today, the market crossed the much-awaited 18,000 mark in style, and all long positions got covered, leaving bulls with hefty profits. However, this break of resistance has also led to the formation of a bearish divergence which was already present in the since it crossed its August 2022 high.
This was the reason, I was not so bullish even after a cross above the 18,000 level. Now as the SGX Nifty is down around 300 points from the high, there is sure to be a gap down opening tomorrow which might shake the confidence of bulls. In my onion, this dip should not be taken as a buying opportunity. The first signal of selling mentioned in yesterday’s update was the break below the previous day’s low. With tomorrow’s gap down opening, this might be happening at the opening tick.
Now, as the weekly expiry is close, expect the market to remain volatile till Thursday. There is a high OI of around 1.45 lacs, 1.26 lacs and 1.01 lacs present at 18,000 PE, 17,900 PE and 17,800 PE, respectively, all of which would become ITM at the opening tick (17800 PE has a lesser chance). The put unwinding might further lead to a continued down move in tomorrow’s session. In short, the selling bears were waiting for is finally here.
