Strong Buy Signals in Indian Indices — What lies ahead?

Nifty, BankNifty and Nifty IT have all triggered "Strong Buy" signals on their weekly charts. Refer below for the specific signals on their respective charts.

But will these signals hold?

The US markets have sent a very different message. After triggering a breakout buy signal earlier on Friday, the DJIA reversed lower. Meanwhile, both the Nasdaq and the S&P 500 formed large red candles on their weekly charts, following breakouts to all-time highs in the previous week. A failed breakout is technically a strong sell signal. Refer charts below.

Adding to the confusion, the Dollar Index and the US 10-year Treasury yield have both generated strong sell signals on their weekly charts. This is generally positive for US and global equity markets. Refer charts below.

However, inflation has come in stronger than expected in the US and elsewhere, prompting central banks to consider tightening monetary policy. This adds another layer of uncertainty to the outlook.

So, where does this leave the Indian trader?

Indian indices are flashing bullish signals, while US markets are showing signs of weakness. At the same time, falling dollar and Treasury yield signals offer some support to the broader equity market outlook, even as inflation and interest rate concerns persist.

With so many conflicting signals, taking a firm directional view is difficult. Let the market decide. Time will tell whether the bullish signals in Indian indices have the strength to hold.

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