The Hindu Business Line : Indicators point to impending weakness

Preferred View: The market sentiment remained bearish during the week gone by. The inability of the index to even get closer to the first resistance zone of 2480-2490 was a clear sign of impending market weakness.

The break below the crucial support level at 2360-2370 was another pointer towards a bearish trend.

The breach of the 2350-level on Friday resulted in the index getting closer to our target zone of 2290-2300.

The weekly close below the 2350-mark has now imparted further weakness. The pattern and the momentum behind the fall from the all time high of 2670 indicates that the present decline may just be the first segment of the overall corrective phase.

Once this leg of the decline gets over, the index is likely to see a brief upward correction that would be followed by another segment of decline.

The immediate support is placed at the 2270-2280 range.

Any effort to move up is likely to face resistance at 2360-2380.

As mentioned last week, we continue to place importance to the support level at the 2270-2280 range.

In the weekly charts, there is a threat of a slide to 2050-2100. The threat would become an eventuality if the index drops below quite a clutch of significant support levels.

The 2270-2280 range is the first support range which also coincides with the 38.2 per cent Fibonacci retracement of the rally from 1896.3 to 2670.

The next support for the Nifty crops up at 2230-2240, from an up sloping trend-line connecting the lows of 1292.2 and 1896.3.

A weekly close below this trend-line (having a slope of about 12.1 points per week), would confirm the possibility of a drop to the 2050-2100 range.

Comments: The just concluded week was packed with information and action. The announcement of the credit policy by the Reserve Bank lent some impetus to the market on Tuesday.

The relatively lacklustre performance of heavyweights such as Bharti, SBI and Tata Steel did not help the cause either.

SENSEX (7685.64)

The trend remained bearish and the volatility has increased in the process. Such an extremity in volatility would generally be followed by a pull back in the opposite direction to the earlier trend.

There is a fair chance of a relief rally taking shape. There is a multitude of support zooming in at the 7060-7160 range.

There is fair chance that the index would form a major support or a significant pivot at this level.

There is resistance at the 7900-7930 range. Investors may use any uptrend to reduce exposures as there are no signs of reversal of the bearish trend.

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