The Hindu Business Line : Index Outlook

Holiday cheer spilled over in to equity markets in the first two trading days of 2009. Stocks across the globe soared higher giving a very cheerful welcome to the New Year. The largesse doled out by the monetary and fiscal stimulus package announced on Friday should ensure that this buoyancy sustains for few more sessions. Of course sceptics would argue that the rally last week was accompanied by very low volumes implying that the larger players were still away holidaying. Derivative segment recorded abysmal turnover all through last week. FII activity was almost negligible in the last two trading sessions.

Sensex reversed higher from an intra-week low at 9164, above the short-term trend deciding point at 9000 indicated in our previous column. It has now recouped all the losses made in the previous week and also negated the bearish evening star pattern in the weekly candlestick chart. Momentum indicators are on the verge of crossing over in to the positive zone. In other words, the index is approaching key medium-term resistance level.

As explained last week, many global indices are unfolding the third wave up from the November 20, 2008 low. The pattern in Sensex too is similar and the target of this wave up is 10308 and 11034. The band between 10700 and 11000 continues to be a strong resistance in the near-term. This is also the ceiling of the medium-term trading range between 8000 and 11000. Investors should stay watchful until this zone is cleared. Subsequent target is 12192.

Sensex could move higher to 10188 or 10318 in the early part of next week. If the index stumbles here, a retreat to 9500 is likely. Rally beyond 10318 will take the index towards the former peak at 10945. Key support for the short- term is at 9162. Close below this level will indicate the end of the short-term up trend from the trough at 8316.

Nifty (3046.7)

Nifty reversed above the support at 2740 indicated last week and went on to close the week with a 6 per cent gain. If the third part of the up-move from 2502-trough is unfolding now, the targets for this wave are 3187 or 3420. The zone between 3150 and 3250 remains a key medium-term resistance level and investors should stay vigilant as the index approaches this zone. The medium-term trading range for the index is between 2500 and 3250. If the upper boundary is shattered emphatically, next target would be 3560.

Nifty can move up to 3110 or 3146 in the initial part of next week. Move above these levels will take the index to the December peak at 3240. Supports will be available at 2875, 2812 and 2740. Traders can trade long as long as the first support holds.

Global Cues

Equity markets had a flying start to 2009. Equities across the globe soared higher on Friday when they opened after the New Year break. Most global indices gained more than 3 per cent on Friday. CBOE volatility index declined below 40 for the first time since October 2008, signalling abatement in investors’ trepidation. A weekly close below 35 will signal that a medium-term down trend is in progress in this index.

DJIA moved above 9000 on January 2. As we have been reiterating, the third leg up from 7449-trough can take the index higher to 9338 or 9635. Close below 8060 is required to negate this view. Corresponding target in S&P 500 is 1000. Commodities too perked up towards weekend and CRB index closed the week above the critical 357 mark. —Lokeshwarri S. K.

More Stories on : Stock Markets | Technical Analysis | Outlook

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

Stories in this Section
‘US key to emerging market recovery”

FT India Life Stage Funds – 20s Plan — Promise of potential

Everest Kanto Cylinders: Buy

IVRCL Infrastructures & Projects: Buy

Rolta India: Buy

What’s on the saving menu for 2009?

Index Outlook

Punjab National Bank: Buy