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Indian equities took just one day to recover from the jolt received by the monetary policy delivered last Tuesday. While talking about this characteristic of stock markets, Robert Prechter had remarked that the market’s trends derive from the mood of the investing herd, which trends and reverses according to its own internal dynamics. After a 500-point wobble on Tuesday, Sensex went on to close the week in positive terrain.

The positive weekly close was largely due to the smart intra-day recovery on Friday. Expiry of the July contracts in the derivative segment passed without undue volatility. High Nifty put call ratio towards the end of the week denotes that a large chunk of the short positions have been rolled over. This is a positive since short covering can extend fledgling up-moves.

This is the fourth consecutive positive weekly close for the Sensex. But the long shadows in the weekly bar in the candle-stick chart imply that the fight-back has not been easy for the bulls. If we consider the weekly and monthly charts, the Sensex appears to be consolidating at lower levels. There are early signals visible in the weekly and daily oscillators chart that suggest that a medium term trough could be in place at 12514.

The short-term trend in the Sensex is currently up. It has bounced higher after retracing 50 per cent of the up move from the 12514 trough. The index is also firmly placed above the medium-term trend line. The third part of this short-term up trend can take the index upwards 15344 or 15841. The positive short-term view will be negated only on a decline below 13500.

Our medium term view remains unaltered. The index faces strong medium-term resistance between 15000 and 16000. A downward reversal from this zone would make the index vacillate in the band between 12500 and 15800.

It is certainly a welcome relief to stop looking southward for once. The Sensex could move higher to 15130 and then 15344 next week. But struggle to get past these levels would result in a sideways move between 14000 and 15000 for the rest of the week. Supports stay at 13830 and then 13520.

Nifty reversed from an intra week low at 4159 - that is half way down the rally from the 3790 trough. The near-term trend in the index is currently up and it can move higher to 4539 or 4622.

A reversal from either of these levels would result in a sideways move between 4200 and 4600 for a few sessions. Target beyond 4622 is at 4776.

As mentioned last week, the index has strong medium-term resistance at 4560 and then at 4776. Traders ought to watch out for their long positions around these levels. Reversal from either of these levels would result in a sideways move between 3800 and 4800 over the medium-term.

The supports for the week are at 4160 and then 4080. Buying in declines is recommended as long as the index remains above the second support.

It was status quo in global equities at the end of last week. The sharp erosion witnessed in the previous week did not deepen further, nor did it mend.

Dow Jones Industrial Average bounced off the support at 11,150 indicated in our previous column. But a lower peak at 11,586 and deterioration in daily momentum implies that the index could decline below 11150 in the near-term. Asian and European stock markets were mixed, but there was no definitive break-out in either direction, visible in any market.

Commodities, too, moved sideways after the decline in the previous week. Nymex crude formed a trough at $120 and is moving sideways between $120 and $128. The short-term trend is down and a close above $135 is needed to signal the resumption of the bullish fervour. Else, a medium-term decline to $110 remains in reckoning. — Lokeshwarri S. K.

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