*Faint cracks in uptrend * **
** ** ** ** ** ** ** Nissar Ahmad *Negotiating the *slope — *Sensex (14764.4) * US President, Barack Obama, and the World Bank played the miscreant over last fortnight, deflating equity markets with their grim statements about a prolonged recession. The whimsical monsoons were Indian equities’ bête noire that kept stock prices in check for most part of last week before a bout of buying, ostensibly triggered by changing Nifty weights, made Sensex close 242 points higher. Volumes were very strong last week but breadth turned negative on many days. Weak rollover of June contracts denotes that market participants are adopting a cautious stance ahead of the Union Budget. FIIs pulled out about $500 million in the first four sessions of the week though they turned net buyers on Friday. Following three elongated white candles in the monthly Sensex chart, we have a long-legged doji for June. This formation denotes indecision and is perfectly justified given the 94 per cent rally from the March lows. Weekly and daily momentum indicators are reversing downward reflecting sagging momentum. The 10-day rate of change oscillator’s decline in to the negative zone too portends prolonged weakness. The medium-term uptrend from the March lows is showing faint signs of cracks. We had explained earlier that the index faces strong intermediate resistance in the area between 15500 and 16200. Sensex has already declined 10 per cent from its recent peak of 15600. The index has also retraced 21 per cent of the prior up-move from 8047. It is, however, too soon to judge if the ongoing correction is a short-term pull-back in the medium term uptrend or the commencement of a medium term down-trend. *If the down-move *from June 12 was a short-term correction, then it could have ended at 14014 and the index can now proceed higher to 15800 or 16200 once more. *If the Sensex *has already formed a medium-term peak at 15600, it will not cross above this level over the next couple of weeks. Minimum downward targets according to this assumption are 13346 and 12730. The duration of the down-move can be a minimum of one-month. The open gap between 12173 and 13480 will be an important support zone for the medium term. The 200-day moving average at 12100 will also be an important medium term support. To put it in other words, Sensex is reversing lower from key resistance and a medium term peak could already have been formed at 15600. A rally above 15600 over the next couple of weeks will negate this view and cause another leg of the uptrend that takes Sensex beyond 16000. Sensex can be volatile between 14000 and 15600 next week. Failure to move above the first target will usher in a decline to 14000 or 13800. Target below 13800 is 13197. *Nifty (4375.5) * Nifty declined to 4143 last week before rallying on Friday to close with 61 points gain. Short-term resistance for the index are at 4482 and 4693. Failure to move above the first target will usher in a decline to 4100 or 4044 in the short-term. Nifty too is declining from key medium term resistance zone between 4600 and 4900. It is yet to be confirmed if a medium term peak has been formed at 4693. If the index fails to rally beyond 4693 over the next couple of weeks, it can be concluded that a medium term correction that can last a few months is in progress that has the minimum targets of 4051 and 3876. *Global Cues * Equity markets worldwide were under pressure in the first half of the week but the recovery on Thursday helped most equity indices to close on relatively stable note. European markets were relatively weak. DJ Euro STOXX 50 closed the week down 2 per cent. Some of the European markets have already retraced 30 per cent of the gains recorded since March. Many of the Asian indices are reversing lower from significant resistance levels. The action this week should be closely watched to gauge if the medium term trend has reversed or if it was just a short-term correction in these indices. The Dow moved in the range between 8600 and 8800 for two weeks before beginning a short-term down-trend. This index retraced 30 per cent of the down-trend from the October 2007 peak when it recorded the recent peak at 8878. In other words, if the move from March lows in a counter-trend pull-back (bear market rally in common parlance) it could have ended there. The struggle and failure to move above the 200 day EMA also supports this view. But a weekly close below 7800 is required to indicate that the index can move back to the March lows. Else it can reverse higher from 7800 or 7400. S&P 500 is also displaying a similar trend. A strong close above 956 is needed to turn the short term trend positive again. CBOE volatility index is moving in a band between 26 and 33 since the beginning May. While the fact that it has not spiked up indicates lack of nervousness among investors it needs to be noted that it has not declined to its bull-market levels below 20 either implying that investors have not turned overwhelmingly bullish yet. — *Lokeshwarri S.K* http://www.thehindubusinessline.com/iw/2009/06/28/stories/2009062850360900.htm --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
