Sentiment Update

The Nifty has been falling for two weeks in low volumes, but I am only talking about it now. Why? When we look for divergences in price action we need evidence that it is a divergence and there is an actual trend reversal from that divergence. An oversold reading in other indicators is also useful. So at the May bottom volumes were low but the May'22 bottom was not lower than the March bottom so not a divergence. Now we have a lower low in Nifty compared to the previous bottom in March and this is a positive divergence after Nifty actually reverses from the downtrend to up near term. The oversold reading in the RSI indicator is also useful input. So this has near-term bullish implications.

A similar pattern has persisted in the India VIX as well, it was not rising during the decline in Nifty, but now it amounts to a bullish divergence. This means prices need not continue lower immediately and there could be a pause. It could be a major trend reversal as well if the wave count says so. This data point only tells us about the current condition, not the future. The divergence is a pause for relief from the oversold condition. The rest comes down to our overall interpretation of the market.

A positive divergence is also developing in the OIPCR below where the indicator is not making a new low as of now.

Similarly, we also have a positive divergence in the 20day A/D ratio below between the May'22 and June'22 bottoms