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Market was at its provoking best last week. It rallied higher in the early part of the week, but not enough to make the bulls perk up. Then it declined, but so slightly that the bears were left unsatisfied as well. The close was on a very flat note leaving both camps guessing about its next move. With the Christmas holiday season looming large, investors need to resign themselves to a few more weeks of similar dithering market moves.

Volumes were nothing to write home about. Activity in the derivative segment however picked up on Friday as stocks rallied suddenly higher. With the open interest in futures and options reaching record highs, next week promises to be an interesting one as the November series rolls to expiry.

Momentum indicators in the daily chart are holding in the bullish zone but they are unable to make any headway. The 10-day rate of change oscillator is dipping towards the zero line and the 14-day relative strength index is moving sideways between 50 and 60 implying that another 2 per cent decline can push the index in to a short-term down trend.

Negative divergence in weekly oscillators continues implying that the index lacks momentum over the medium term time-frame.

We remain ambivalent regarding the medium-term movement of the index. It is not yet clear if the medium-term up-move from the 13,219 trough has ended or if it will unfurl yet another wave higher.

If the wave from 13,219 continues, first target occurs at 17,970 and the next one at 19,600.

If the move from 13,219 has ended at the 17,493 peak, a sideways move can now follow between 16,000 and 18,000 before the index reverses lower.

Our preferred view is that the index moves in the range between 15,000 and 18,000 for the rest of this calendar.

A weekly close above 18,000 is needed to signal an impending rally to 19,600 or higher. On the other hand, a weekly close below 16,000 is required to shift the medium term bias to negative.

The short-term bias for the index remains positive. But presence of strong resistance just ahead, around 17,500, can bring rallies to an abrupt end. Short term supports for the index are at 16,400, 16,200 and 16,000.

Traders can hold their long positions until the first support holds.

Fresh purchases should be avoided on a decline below 16,000. Subsequent targets are at 15,743, 15,330 and 14,920.

Nifty recorded an intra-week peak of 5,079 and then turned extremely volatile to end the week with a mild gain. The quandary that we have been facing over the last two weeks remains unresolved. In other words, a sharp move is possible in either direction.

The two possible moves that remain in our purview are (a) a sideways move between 5,000 and 4,500 for a few more weeks and (b) a strong move beyond 5,000 that takes the index towards 5,300.

The short-term bias remains positive since the correction last week was extremely shallow. Short-term supports for the index are at 4,870 and 4,740. Short-term traders can buy in declines as long as the index trades above the first support. The bias will turn negative only on a decline below the second support.

If the index holds above 4,740, it will imply that a move higher to 5,140, 5,230 or 5,270 is possible in the near term.

We stay with the view that a broad-based move between 4,400 and 5,300 is possible for the rest of this year.

Global benchmarks moved sideways after a strong up-move in the early part of the week resulting in a flat to slightly negative weekly close for most global benchmarks. CBOE volatility index declined to an intra-week low of 21.6 but perked up towards the end of the week as global equity began a mild correction.

The Dow recorded a fresh 2009 high of 10,438 on Tuesday before moving lower. As we have noted earlier, target of the third leg of the intermediate term uptrend from the October lows gives us the target of 10,496.

A 50 per cent-retracement of the decline from October 2007 peak gives the index the target of 10,333. Since both these levels have already been achieved, the Dow is ripe for a deeper correction. But if the uptrend continues, next intermediate-term target for the index lies between 11,300 and 11,500.

The Shanghai Composite Index has been the out-performer last week closing almost 4 per cent higher. This index has also moved past the intermediate term resistance of 3,164 last week implying that it could now retest the next impediment at 3,500.

The US dollar index traded on the Intercontinental Exchange showed some signs of shaking off the bear’s grip on Friday as it spurted to a high of 76.5. This index however needs to record a close above the 50-day moving average at 76 to signal a change in the downtrend.

— Lokeshwarri S.K.

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