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As the milestones whizzed past the Sensex and Nifty last week, all the concerns plaguing the markets over the last two months appear to have been dumped by the way-side. We are once more in a situation where the controls of the market are in the hands of the highly whimsical ‘liquidity’ flows. That can be the only possible explanation for this blind hurtle down the high-speed track.

However, liquidity is showing no signs of abating just yet. The Sensex’s move above 16000 has enthused the external investors into infusing a massive $4 billion in the month of September alone. The Sensex had a strong week with positive-closes in all the sessions. Despite the index moving beyond our short-term target at 17208, the momentum is not showing any sign of flagging. The movement of the last four sessions resembles a running correction that implies a very positive undercurrent.

As per e-wave counts, the targets for the third wave from 13780 are 17404 and then 18601. A 1:1 extrapolation of the move from 12316 too gives us an immediate target at 17422. In other words, the Sensex could pause at current levels and correct downwards to 16793 or 16635. But a halt above the second support would be a positive signal and would provide an entry point to short-term traders.

If the Sensex continues to speed ahead and moves above 17500 next week, we could be at the medium-term target of 18239 before we realise it. Medium-term outlook for the Sensex stays positive as long as the index remains above 16100.

The outlook for the week ahead is positive. The Sensex could move higher to 17496, 17710 or 17955. Inability to move beyond the first target will make the index move sideways between 16600 and 17600. Needless to add that such a sideways move will be conducive to the current up trend. Supports for the week are at 16793 and then 16635. Traders can buy in correction with tight stop losses. Investors can use the rally to weed out the dud shares from their portfolio.

Nifty achieved our near-term target of 5027 last week. But the wave structure indicates that the third from the 4002-trough might unfurl to its maximum extent, thus giving us the next target at 5364 (medium-term target).

The upper targets for the week ahead are 5055, 5107 and then 5176. Some caution is advisable in the band between 5000 and 5100 as the Nifty can pause here, and consolidate in the zone between 4800 and 5100.

Supports are at 4883, 4835 and then 4700. Traders can buy in corrections as long as the Nifty trades above the first support. Investors can hold their positions till the Nifty stays above 4700.

Dow Jones Industrial Average moved sideways with a positive bias last week. The index is flirting with the 14000-mark and chart patterns suggest that a new high is around the corner. The NASDAQ too is displaying strength. European and Latin American markets continue to under-perform in the current rally with most indices trading well below their July peaks. Some Asian indices such as Kospi, Nikkei and Taiwan weighted index perked up towards the end of the week.

The correction in crude prices halted above the $78 indicated last week. The commodity can move between $78 and $84 for a few weeks. — Lokeshwarri S. K.

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