Midcap Madness Revisited

Published: Wed, 07/27/16

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The Complete Technical Analysis
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The Long Short Report is our Monthly market Outlook publication. Being monthly the object is also to time the reports so that they are appropriate with the market conditions. A Long Short Update is posted on an ongoing basis highlighting and updating key observations to watch for the medium to long term.

27 JULY 2016 


Yesterday's Long Short Update to Subscribers included the following chart of the Nifty V/s the Midcap Index. It discusses a major inter market divergence that developed in the market. Now Dow theory divergences of this nature are seen at major market tops and bottoms. In 2008-09 a 5 month apart new low in the Midcaps was not confirmed by the Nifty and it became the final bottom for that move. Similarly a year back the new high in Midcap indices in July 2015 was not confirmed by the Nifty and the market fell for another 6 months. But during this period of correction Midcap indices have not corrected much and have held on to their Relative Strength on an RS chart [that I also post from time to time]. So the new high in the Midcap index today comes without a meaningful correction as though the previous trend is still in force. This new high is not yet confirmed by the Nifty. So unless the Nifty catches up and proves the Midcaps right about the bull trend this inter market divergence is a stark warning of a long term trend reversal on hand. There are many other reasons why this level is important and needs watching that we continue to explore.


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Rohit Srivastava
www.indiacharts.com
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