2026#27: Strength Beneath the Surface
This week's Pro-Setups Dashboard reveals why the market's foundation remains stronger than the headlines suggest.
Weekly Market Update: Week Ended July 4th, 2026
The market resumed its upward momentum this week, with gains seen across all major indices. The Nifty50 and Sensex advanced 0.89% and 0.86% respectively, while the broader market also participated, with the Nifty500 rising 0.81%. Although the Midcap150 posted a relatively modest gain of 0.59%, strength returned to the small-cap segment, where the Nifty MidSmallcap400 and Nifty Smallcap250 climbed 0.95% and an impressive 1.65% respectively. The broad-based participation, led by renewed buying in small-cap stocks, suggests that investor sentiment remains constructive and risk appetite continues to improve.
Market sentiment remained constructive through the week, supported by continued domestic buying and improving risk appetite across the broader market. The strong participation from small-cap stocks reflects growing investor confidence, although selective profit booking after the recent rally cannot be ruled out. Going into next week, traders should closely watch the progress of the upcoming earnings season, FII/DII flow trends as these are likely to influence near-term market direction.
Technical Perspective
Nifty500 chart
Daily Chart: The Nifty500 extended its sequence of higher highs and higher lows, closing near the week’s high and just below an important resistance zone. Price continues to trade comfortably above the rising 50-day EMA, confirming that the short-term trend remains firmly bullish.
The recent breakout has been accompanied by healthy price structure rather than an overstretched move. As long as the index holds above the recent higher low and the 50-day EMA, the path of least resistance remains to the upside, with a decisive breakout above the overhead resistance likely to trigger the next leg of the rally.
Weekly Chart: On the higher timeframe, the index has reclaimed its long-term moving average and continues to build a pattern of higher lows, indicating that the medium-term trend is gradually strengthening. However, the index is now approaching a key supply zone where sellers have previously emerged.
Outlook: The overall structure remains constructive across both timeframes. Traders should watch for a convincing breakout above the current resistance zone, as that would significantly improve the probability of a sustained continuation of the uptrend, while any pullback toward support is likely to be viewed as a buying opportunity unless the recent swing low is violated.
Market Breadth chart
By the end of the week, 58% of stocks were trading above their 10-day EMA, while 65% and 68% were above their 30-day and 50-day EMAs respectively, indicating that the participation remained healthy across all timeframes. The gradual improvement in the 30 and 50 EMAs indicates that the rally continues to broaden, with a growing number of stocks participating in the intermediate-term uptrend.
The Nifty500 continues to maintain a bullish 10-EMA above 20-EMA, with the crossover that happened on 16th June, retaining the “Stay” signal. This indicates that the broader market remains in a positive trend, favouring existing long positions until a bearish crossover signals a change in market character.
Sectoral Performance
Sector rotation continues to provide valuable clues about where institutional money is flowing. Financial Services, Pharma and Packaging remain the strongest leadership groups, while Automobiles, Consumer Durables, Defence and Housing Finance are showing improving momentum and are worth keeping on your watchlist for fresh opportunities. On the other hand, sectors such as Cement, IT, Oil & Gas, Power and PSU Banks continue to weaken, suggesting that capital is rotating away from these areas. Traders and investors should focus their search for high-probability setups within the leading and improving sectors, as stocks from these groups tend to outperform when the broader market remains in an uptrend.
Did you know you can click on the “AI” button on the Sectoral Performance on Pro-Setups page to generate a daily summary report?
Trading & Investment Strategy
Trend remains bullish – Stay with the trend until price action suggests otherwise.
Buy strength, don’t chase it – Prefer breakouts from sound bases or pullbacks to support.
Follow sector leadership – Focus only on leading and improving sectors and avoid stocks from sectors showing persistent relative weakness unless they show clear signs of trend reversal.
Respect resistance – With the market approaching a key supply zone, expect stock-specific opportunities to outperform broad market exposure.
Manage risk – Let winners run, trail stop-losses higher, and keep fresh positions appropriately sized ahead of earnings-driven volatility.
Summary
The market continues to strengthen beneath the surface. Price action remains constructive, market breadth is supportive, and sector rotation suggests institutional money is still finding opportunities in select pockets of the market. While the Nifty500 is now approaching an important resistance zone that could lead to short-term consolidation, the overall evidence continues to favour staying with the trend. For traders and investors alike, the coming weeks are likely to reward disciplined stock selection over broad market bets - focus on leaders, respect risk, and let the trend do the heavy lifting.