Market at a Crossroads: Tariffs Are Not the Problem

It’s  an  interesting  time  in  the  market,  but  we  maintain  that  the  current  decline  is  not  driven  by  the  recent  tariff  news.    We  typically  don’t  see  the  market  fall  twice  on  the  same  catalyst,  and  the  50%  tariff  news  has  been  known  since  early  August.   This information should already be fully digested.  The  real  reason  for  the  downturn  is  the  persistent  weakness  in  banking  stocks.

Regarding  the  tariff  issue,  we  believe  these  tariffs  will  be  rolled  back  by  President  Trump  sometime  in  September.   It is highly unlikely that these 50% rates will be sustained for a significantly long period of time.

Near-Term Consolidation, Long-Term Bullish View Intact

As I updated on Tuesday, the near-term setup has shifted from extremely bullish to a more cautious stance. We now anticipate a period of consolidation, but a reversal is due sooner rather than later.  In  a  normal  scenario,  we  do  not  expect  NIFTY  to  break  below  its  August  8th  low  of  24337  on  a  spot  basis.    Our  long-term  view  remains  a  fresh  record  high  above  26277  until  October  16th,  which  leaves  plenty  of  time  for  this  target  to  be  achieved.

If, for any reason, the August 8th low of 24337 is broken, we would expect a quick downside extension. However, even this dip would present a strong buying opportunity. When analyzing markets, the relationship between price and time is paramount. This is a core tenet of our analysis.

For  instance,  the  rally  from  24337  to  25153  took  exactly  12  calendar  days  (including  one  trading  holiday).   This duration is a key factor.

If  the  low  of  24337  breaks  before  September  3rd  (the  12th  calendar  day  from  the  August  21st  high),  it  would  be  a  bearish  signal.

However, if the low breaks after September 3rd, it would be a bullish confirmation, and in that scenario, we would aggressively buy all dips for a December expiry.

Watch for a Major Time Cycle

Finally,  a  critical  data  point:  On  August  29th,  NIFTY  is  scheduled  to  complete  a  144-day  cycle  from  its  April  7th  low.   This is a significant development on the time-cycle front that we will be watching closely.

“To  wrap  up,  the  crucial  test  for  this  market  will  be  how  it  reacts  around  the  August  8th  low  and  the  coming  time  cycle  dates.    We  maintain  our  long-term  targets,  and  look  for  a  strong  buying  opportunity  on  any  further  dips.”