$NIFTY in bullish momentum. More upside-expected

During the last few days, we have been discussing the weakness in the US Dollar and the DXY index and what it means for the commodities like Gold (GLD) and Oil (USOIL). But we never discussed the positive effect it has on the emerging markets like $NIFTY. The index NIFTY which consists of top 50 stocks based on market cap in India is having a positive momentum divergence after touching the lower bound of the upward sloping Fib retracement levels. Here in this blog space on 17th March we posted that NIFTY looks oversold and we might be ready for a bounce. We favored going long NIFTY at 22000. Since then, the RSI bottomed and we up 8% form the lows of 22032.

If we still follow the Fib levels from the last blog, the charts are telling us that we might be headed to 25000 before having any meaning full pullback. The index internals look healthy with RSI hovering around 50 and not in overbought territory. And the tailwind to all this is still the US Dollar story. Here we are targeting 95 in the DXY on a short-term basis. This might push NIFTY to 25000 and beyond.

Verdict : NIFTY rally continues to 25000; DXY to 95.