The Hindu Business Line : Index Outlook

The Sensex closed the week with a gain of 1.7 per cent. Now that the deluge of results is behind us, the markets seem to be pausing to take stock and decide about the future course of action.

We had discussed the first signs of life on the long-term charts in this column last week.

The market action last week has reinforced these signs of strength. The 10-week ROC has crossed over into the positive zone, which is remarkable.

The bullish engulfing candle seen on the weekly chart of the Sensex last week has been followed by a small green candle this week.

Thin volumes are another factor favouring further upside. The reasons being that market peaks normally see high volumes, great deal of speculative interest and an air of misplaced optimism.

The cautious mood prevalent in the market now rules out formation of a significant peak at this juncture.

Short-term targets for this week as per Elliott Wave counts are at 11080, 11247 and then 11517.

If we consider the target for the upward move from the low of 9875, the Sensex can go on to 11208 and then to 11557. The 11200 mark continues to be a major impediment for the short term.

But the chart pattern last week makes us hopeful that 11200 will be overcome shortly.

The downside supports for this week are primarily at 10620 and then at 10296.

Our short-term outlook stays positive.

This view will be altered only if the Sensex closes below 10600.

Traders should buy on dips with stop-loss at 10550. Shorting at current levels in anticipation of significant downside is not recommended.

Nifty (3176.7)

The Nifty crossed the much-watched 3200 level on Thursday and hit an intra-week of 3234.2. The important short-term support for the Nifty is at 3090.

Traders can buy on dips with a stop-loss at 3070. Do not initiate fresh longs if the Nifty closes below 3090. There is no cause for investors to worry as long as the Nifty is above 3000.

The upside targets for the Nifty this week are 3283 and then 3357.

Global Cues

It has been a quiet week for the majority of the global markets. Charts of all the major indices displayed narrow range-bound moves, which holds promise of a breakout on the upper side.

The Dow Jones Industrial Average is halting near its June peak of 11340. We would need the Federal Reserve to keep rates unchanged on August 8for all indices to launch into their next leg upward.

Nymex crude September futures flared up to a mid-week high of $76.50 though they cooled down by the end of the week to $74.76.

The short-term trend turned up once more last week as the future bounced from a low of $72.6. Base metals like copper and aluminium, too, are perking up on signs of halt in interest rate hikes in US.

Lokeshwarri S.K.

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