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It was week of high drama on the Indian bourses. The markets initially appeared to be plunging in to a bottomless pit. But the 700-points recovery on Wednesday brought the spring back to the step of the drooping bulls only to see their hopes dashed once more on Thursday. The mild 2.5 per cent weekly loss does not accurately capture the despair or the hope that marked last week’s trading.

Though the violent whipsaw witnessed last week would have drained most market participants, it is a positive from the technical view-point since it shows that the bulls continue to be in business and they are willing to fight tooth and nail before yielding any further territory from this point. Spike in volumes on Wednesday when the market staged a pull-back implies that there is money waiting to come back in to the market. FIIs continued to press sales though the intensity is reducing. They were net buyers in index futures and options indicating that some of the short positions were being covered.

Daily momentum indicators are showing signs of nascent recovery. But the picture in the weekly charts continues to be bleak. The 14-week RSI is at a level last seen in 2001 implying that the downward momentum continues to be strong for the medium-term. The scene is similar on the monthly charts.

The Sensex declined below 13000 last week to form an intra-week trough at 12823. The sideways move that followed is a symmetric triangle that marks a temporary halt in the prevailing trend. The C wave from the 17735-peak is charting a zigzag pattern with the immediate target at 12699. If we consider the minor and sub-minor counts of this pattern, there is a strong likelihood of this sharp decline halting in the band between 12300 and 12800 and an medium term up-trend beginning from this zone that can take the index beyond 15000 again.

If the downward momentum continues and drags the index below 12300, the subsequent support band lies between 11800 and 11900. The key medium-term resistance is at 14677. A close above this level is needed to signal that a sustainable recovery is under way.

For the week ahead, Sensex can stay in the choppy mode between 12800 and 13500 for a few more sessions. Near-term resistances are at 13800 and then 14500. Reversal below the first resistance would imply that the index is heading towards 12700, 12504 or 12392 in the near-term.

It was a head-long plunge for the Nifty in the first half of last week as it recorded a low at 3848, way below our outermost short-term target at 3961. The index faces resistances at 4141 and then 4300 in the week ahead. Failure to move past the first resistance would denote that the index would move lower to 3961 or 3737 in the near-term.

The confluence of targets around 3730 implies that a medium-term trough is possible here that can kick-start a rally to 4500 or 4700 in the index. However, a decline below this support would bring the next target at 3557 in to play. Medium-term trend deciding level for the Nifty is at 4500.

It was a global melt-down in equities last week as most indices slipped to their lowest levels in 2008. The bastions that were holding out thus far such as the commodity stocks dominated markets in Latin America and Russia too succumbed to the selling pressure. The CBOE VIX that indicates the investor’s mood, spiked to 26, indicating the sense of panic in the equity markets.

The Dow Jones Industrial Average moved feebly in the lower range between 11200 and 11400. There is no sign of even a short-term up trend in that index. The picture is not that weak in the S & P 500 that is poised at the March trough at 1250. The week ahead would help in determining the long-term course for this index.

Money ebbing from equities continued to flow in to commodities. CRB index of NYFE held steady at higher levels last week though it gave up part of its mid-week gains. Base metals and crude kept the commodities buzzing. —Lokeshwarri S. K.

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