markettrend766
07-06-2009, 01:17 PM
After the fantastic journey from 8000 to 15000 in three months, Sensex appeared a little lost last week. News flow drying to a trickle and ambling ways of other equity markets could have contributed to this indecisive state. Further, conflicting statements emanating from the Government on disinvestment and on the thrust of the Union Budget made market participants nervous. The Sensex finally slipped past the 15000 mark on Friday afternoon to end with a 3.2 per cent weekly gain.
Second, third and bottom-rung stocks continued to attract immense investor interest and market breadth was positive, even on days when the Sensex closed with losses. Volumes, especially in the cash segment, were very strong, daily turnover last week was almost 50 per cent above the average daily turnover recorded in April. However, inflow of overseas funds was tepid last week
The sideways move recorded by the Sensex over the last two weeks has made the momentum drop significantly. The 10-day Rate of Change (ROC) oscillator fell sharply last week from overbought levels. But the fact that the 10-month ROC has moved in to the positive territory is an encouraging signal. If this indicator sustains above the zero line, it would signal a change in the long-term outlook for Sensex.
There is no sign of reversal in the medium-term up-trend from the March lows yet. We have repeatedly warned against fighting this trend and initiating pre-emptive short positions over the last two months. The market is known for its vagaries that can outwit the best brains. Docile trend-following can be the best way to play such a strong trending market.
Targets of the third leg of the up-move from 8047 are 14281 and 16332. Since 61.8 per cent retracement of the down-move from January 2008 peak occurs at 16180, next medium target on a strong close beyond 15300 can be between 16000 and 16300. But it needs to be borne in mind that 15284 (55 per cent retracement) is also a likely peak for the move from March low.
As far as the short-term is concerned, we had outlined two trajectories in our last column. Despite a brief move past 15200, Sensex ended the session below this level. If the decline continues next week, the index can decline to 14594 or 14185. Short-term purchases should be avoided on a close below the first target. The medium-term view will, however, be roiled only on a close below 13470. Resistances for the week ahead would be at 15284, 15698 and 15836.
Nifty (4586.9)
However, minor counts of the move from 2555 indicate that the fifth of C-wave is currently in motion that can terminate at 4428, 4597 or 4791. The second target was achieved last week and traders should tread cautiously as far as long positions are concerned unless there is a clear break above 4650 early next week. We are looking at the possible termination of the move from March lows here.
Supports for the week would be at 4428 and 4300. Fresh long positions ought to be avoided below the first support. Medium-term investors however need not worry until the index closes below 4150. Resistances for the week would be at 4646 and 4758.
Global Cues
It was a relatively sedate week in global equity markets. Most indices closed with 1 to 3 per cent gains. Some Asian indices such as those belonging to Thailand and the Philippines out-performed with over 5 per cent gains. CBOE volatility index traded around the 30 mark and closed with a small up-tick indicating that while investor confidence remains high, it has not received a fresh boost over the past week. The base built by this index during the bull-market days between 2004 and 2006 is between 10 and 20.
The Dow moved higher to an intra week peak of 8839 last week and closed slightly above its 200-day moving average. But the index needs to sustain above this line for a couple of weeks more to signal a long-term trend reversal. Medium-term target of this leg of the up-move in Dow is 8796 and 9410.
If we apply the waterfall effect in Elliott wave analysis, the Dow could reverse anytime soon from the resistance zone around 8800. Heavy negative divergence in both daily and weekly momentum too signal the uptrend from March trough could be drawing to a close. These divergences are apparent in the S&P 500 too and further this index has also reached its key medium-term target of 943 that was the peak formed on January 9.
Second, third and bottom-rung stocks continued to attract immense investor interest and market breadth was positive, even on days when the Sensex closed with losses. Volumes, especially in the cash segment, were very strong, daily turnover last week was almost 50 per cent above the average daily turnover recorded in April. However, inflow of overseas funds was tepid last week
The sideways move recorded by the Sensex over the last two weeks has made the momentum drop significantly. The 10-day Rate of Change (ROC) oscillator fell sharply last week from overbought levels. But the fact that the 10-month ROC has moved in to the positive territory is an encouraging signal. If this indicator sustains above the zero line, it would signal a change in the long-term outlook for Sensex.
There is no sign of reversal in the medium-term up-trend from the March lows yet. We have repeatedly warned against fighting this trend and initiating pre-emptive short positions over the last two months. The market is known for its vagaries that can outwit the best brains. Docile trend-following can be the best way to play such a strong trending market.
Targets of the third leg of the up-move from 8047 are 14281 and 16332. Since 61.8 per cent retracement of the down-move from January 2008 peak occurs at 16180, next medium target on a strong close beyond 15300 can be between 16000 and 16300. But it needs to be borne in mind that 15284 (55 per cent retracement) is also a likely peak for the move from March low.
As far as the short-term is concerned, we had outlined two trajectories in our last column. Despite a brief move past 15200, Sensex ended the session below this level. If the decline continues next week, the index can decline to 14594 or 14185. Short-term purchases should be avoided on a close below the first target. The medium-term view will, however, be roiled only on a close below 13470. Resistances for the week ahead would be at 15284, 15698 and 15836.
Nifty (4586.9)
However, minor counts of the move from 2555 indicate that the fifth of C-wave is currently in motion that can terminate at 4428, 4597 or 4791. The second target was achieved last week and traders should tread cautiously as far as long positions are concerned unless there is a clear break above 4650 early next week. We are looking at the possible termination of the move from March lows here.
Supports for the week would be at 4428 and 4300. Fresh long positions ought to be avoided below the first support. Medium-term investors however need not worry until the index closes below 4150. Resistances for the week would be at 4646 and 4758.
Global Cues
It was a relatively sedate week in global equity markets. Most indices closed with 1 to 3 per cent gains. Some Asian indices such as those belonging to Thailand and the Philippines out-performed with over 5 per cent gains. CBOE volatility index traded around the 30 mark and closed with a small up-tick indicating that while investor confidence remains high, it has not received a fresh boost over the past week. The base built by this index during the bull-market days between 2004 and 2006 is between 10 and 20.
The Dow moved higher to an intra week peak of 8839 last week and closed slightly above its 200-day moving average. But the index needs to sustain above this line for a couple of weeks more to signal a long-term trend reversal. Medium-term target of this leg of the up-move in Dow is 8796 and 9410.
If we apply the waterfall effect in Elliott wave analysis, the Dow could reverse anytime soon from the resistance zone around 8800. Heavy negative divergence in both daily and weekly momentum too signal the uptrend from March trough could be drawing to a close. These divergences are apparent in the S&P 500 too and further this index has also reached its key medium-term target of 943 that was the peak formed on January 9.