The Hindu Business Line : Index Outlook

Markets these days are living from one Central Bank meeting to another. All this rhetoric, prognosticating, speculation etc. about interest rates is getting tiring, to say the least.

We had two Central Bank meetings last week with a thwarted terror attack thrown in to spice up the proceedings.

The Sensex stood rock steady amidst all this, managing to gain 3 per cent for the week.

We analyse the intermediate term outlook for the Sensex to start with. We maintain our view that the upward move from the low of 8800 in the Sensex is the B wave of the correction that started from the peak of 12671. It is not possible to project the exact point at which the B wave will complete and the downward moving C will start. 11,200 is a possible point at which the B wave can end as it is 61.8 per cent retracement of the downward move from 12671.

But it is not an infallible target. B waves can go on to 70 per cent, 100 per cent or even 1.618 per cent of A wave depending on the kind of corrective formation that evolves.

The oscillators on the weekly chart continue to look promising and are just beginning to break-out.

The Sensex reversed from our first target of 11247 on Friday. It can go on to 11530 and then 11990 if the momentum picks up.

But investors and traders need to be highly cautious now. The likelihood of a sharp reversal increases manifold from this point.

As far as the short-term outlook is concerned, we do not have confirmation that the intermediate term up trend from the low of 8800 has ended.

But first signs of fatigue are showing up on the daily chart of the Sensex and a few of the pivotals.

We can see some mild correction next week to 10950 or 10790.

No fresh buying should be initiated if the Sensex closes below 10650. That would signal that we could be heading for a steeper fall.

The outlook for the Sensex remains positive as long as it stays above 10650. Traders can ride the present upward move by staying long with strict stops. Investors need to be extremely quality conscious if they buy at these levels. It would be a good idea to utilise this rally to pare the exposure in stocks with poor fundamentals.

Nifty (3274)

Nifty, too, closed with a 3 per cent gain last week in spite of all adverse news. It reached our first target of 3283 on Friday.

The next target upward for the Nifty lies at 3314 and then 3362. Traders need to be careful as the nifty approaches the 3300 level.

The downward supports for the week would be at 3142 and then 3126. The medium- term trend will turn down only if the Nifty closes below 3125.

Global Cues

Global markets showed mixed traits last week. The US markets closed the week on a negative note. The DJIA seems to have completed its minor c of a flat formation. Other emerging markets were consolidating sideways.

Nymex September futures took a dip on Thursday to end the week at $74.35. Base metals such as copper and aluminium, too, weakened on Comex on Friday.

The baffling correlation between equities, crude and other commodities continues.

Lokeshwarri S.K.

More Stories on : Technical Analysis | Stock Markets

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