There is an old saying related to the equity markets, “Sell in May and go away!” This refers to the typical slowness and weak performance of the markets during the spring and summer months. Usually this relates to the technology sector of the markets. There is a slowdown in purchases, and consumers in the US and China are looking to travel during the warmer months.
In India, much of the activity during this time is also related to the monsoon season. Since much of the economy is dependent on these needed rains, a late start or weak rain could spell disaster for many companies and their share prices. On the other hand, a good monsoon season is a boon to the same industries.
Forgetting the fundamental factors, we can rely on our technical analysis of the charts to really assist us in determining the market’s direction. Both the Nifty and Sensex move in step with each other and usually hold the key to an individual stock’s price movement. Most stocks will move with rather than against the market indexes.
The weekly chart of the Sensex showed a negative divergence on the indicator while price was reaching weekly supply. Should prices fall from here they could retreat to the demand near 18300.
On a more immediate chart, price is at a daily supply zone. The pattern appears to be a head and shoulders formation but the right shoulder is too high for the classical pattern. We are more likely to see a false break to trap some sellers before a retracement up and then the real fall to the demand near 18804.
The Nifty charts look similar.
So the markets are currently weak and could follow the other global markets lower if there is a selloff this summer. Watch your charts and trade your levels for the best opportunities!