If the first month of the year is anything to go by, 2015 promises to be an action-packed one. All the past excesses in the Eurozone are coming home to roost, roiling financial markets. After Greece threatening to exit the Eurozone, it is now Switzerland’s turn to cause pandemonium by removing the restriction on the Swiss franc’s movement against the euro.

The week began with investors on the edge due to sliding oil prices. Indian equity market, too, slid in the initial part of the week. Then Raghuram Rajan gave markets a bonanza with a surprise 25 basis points rate cut.

That the move took place before the monetary policy meeting, just as the Governor had indicated in the previous monetary policy, implies that the move was premeditated to help markets when turbulence begins.

This move, coupled with short-covering, took the Sensex and the Nifty more than 2 per cent higher on Thursday. But volatility returned on Friday with Swiss National Bank removing the cap on the Swiss franc’s movement against the euro that was in place since 2011. The resultant plunge in euro against the franc brought on a fresh bout of risk-off trades.

The European Central Bank’s meeting scheduled next week will be of great interest now as most market participants expect it to announce a really big stimulus package to shore up the beleaguered Eurozone. The recovery in crude prices could also offer some respite to investors.

The euro will however continue to be under pressure; it is already at 11-year low against the dollar. Critical long-term support is at 1.12 that occurs at the 61.8 per cent retracement of the rally from October 2000-low. The dollar index, on the other hand, has raced above 92.5. Next resistance for this index is at 96.

Investors will have to keep an eye on crude prices, the ECB, as well as numbers coming out of China this week. Given all these drivers, choppiness is expected to continue in financial markets this week.

Oscillators in the daily chart are turning positive. The buy signal in the daily moving average convergence divergence oscillator and the indicator moving above the zero line implies that the short-term uptrend can continue a little longer.

But weakness in the oscillators in the weekly chart signifies that even if the benchmarks rise to new highs, the rally could get thwarted at higher levels.

Sensex (28,121.9)

The Sensex took wing on Thursday that helped it close on a strong note.

The week ahead: The Sensex moved close to the 28,000 level last week, but it has not surged past it. As explained last week, we need a strong close beyond this level to signal that the index is ready to spring to 28,371, 28,591 or 28,809. On the other hand, the failure to move beyond 28,200 in the early part of the week will mean that the index will decline to 27,200 or 26,776 in the days ahead.

Medium-term trend: It is getting extremely difficult to get the medium-term counts right. This is not uncommon in corrective waves. The Sensex is in a corrective wave that is moving upward; in other words, a running correction.

If the Sensex continues to move upward next week, it will be construed as the E wave of a diagonal triangle that can take the index to 29,400 or 29,900. The index needs to close below 26,450 to negate this view.

Nifty (8,513.8)

The Nifty too recorded a strong rally last week that has helped it close above its 50-DMA.

The week ahead: The short-term trend is ambivalent and a sharp move in either direction is possible. If the index surges higher next week, immediate targets are 8,627 and 8,719.

Conversely, the failure to move beyond 8,600 will make the Nifty retreat to 8,350, 8, 236 or 8,065 in the upcoming week.

Medium-term trend: The trend in the index continues to be positive. A surge next week will open the door for a move to 9,000. A close below 8,000 is needed to bring this view under threat.

Global cues

Most global indices closed on a positive note, following a volatile week. The mid-week slide did not last too long as indices moved higher towards the end of the week. As investors’ fear increased mid-week, the CBOE volatility index hit the intra-week peak of 23.4.

Surprisingly, European markets were gung-ho despite the turmoil surrounding the euro. DJ Euro STOXX 50 closed 5 per cent higher, maybe due to the expectation of fresh stimulus from the ECB and the positive fallout of weak euro on their exports.

The Dow closed 225 points lower. The index is however still above the short-term support at 17,200.

As long as the index oscillates between 17,200 and 18,000, the possibility of the Dow moving to 18,100 remains open.

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