The Hindu Business Line : Index Outlook

Markets took one step backward last week. The Sensex recorded a loss of 5.5 per cent and closed the week at 10085.91, just above the psychological support of 10000. It was liquidity that turned unfavourable and eclipsed the strong first quarter earnings declared during the week.

The volumes saw some improvement as earnings announcement led activity was seen on many stocks. But sharp losses were observed on the side counters. The BSE mid-cap index lost 7.41 per cent for the week, while the BSE small-cap index lost 8.99 per cent.

It is a relief that the open interest is relatively lighter in the derivative segment as we go in to the F&O expiry week. Build-up of short positions in the derivatives segment is another positive factor that can cushion a fall in the markets.

We have a medium term peak at 10942 in the Sensex now. The Sensex has taken support at its 200 day EMA positioned at 9968 last week.

That is an important level that needs to hold if the up trend is to resume next week. The next support to watch out for below 9968 is 9618.

This is 61.8 per cent retracement of the rally from the low of 8800. 9618 is the last bastion for the bulls. If this support falls, the Sensex will be on course to re-test the June low of 8800.

The wave counts of the downward move from the top of 10940 in the Sensex suggest weakness.

The Sensex needs to rise past 10500 to turn the short-term trend positive again.

If that does not happen, e-wave targets on the downside are 9809, 9439 and 8839.

To sum up, the weakness in the Sensex will continue unless there is a decisive move beyond 10500.

Investors need to use this period to get their shopping list ready.

There would be plenty of lucrative buying opportunities in the weeks ahead.

Nifty (2945)

The Nifty touched an inter-week high of 3125 on Monday morning. This high remained unchallenged all through the week.

The chart of Nifty is weaker than that of the Sensex as the Nifty has closed the week below its 200-day EMA positioned at 2962.

The next support for the Nifty is at 2829 (61.8 per cent retracement of the rally from 2595).

As per e-wave counts, the Nifty needs to rally past 3098 to turn the short-term bias to positive. If that does not happen, there can be a slide to 2752 or 2642.

Global Cues

The DJIA closed the week with a gain of 1.3 per cent mainly due to the rally on Wednesday caused by Mr Ben Bernanke's comments. The chart of Nasdaq composite index is getting worrisome.

It lost 0.8 per cent last week and is currently below its October 2005 lows.

Asian indices moved lower last week. But they are all above their June 2006 lows except for Taiwan index.

Nymex crude for September delivery has taken support at $71.65 last week. If this level is breached, there can be a dip to $68.80.

More Stories on : Technical Analysis | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page