Major Indices :: Sensex : 15289 :: Nifty : 4609
Intermediate Trend :: Bearish
Key Technical Levels :: 15873- on the upside,14677- on the downside
“if at all, it comes to 12k, it can also come to 8.8k or even 6k”
In the last review we had stated,” the environment is full of distress, however, circumstances are likely to favor the bulls, provided they retaliate and close the week above 15690. Or on the downside, below 14809, the area to watch is 14163-14581. Anything below this will lead to a disastrous situation where the Sensex will be exposed to a low of 13779, formed on 17th August 2007.”
In reality, the circumstances favored the bulls, though moderately, as the Sensex attempted to take 15690, but reached only 15465 and closed at 14994. Nevertheless, as blessing in disguise, it has not seen the worst i.e. fall below 14809.
Prima facie, the downside is restricted. We may continue to think positive about the markets, in the next few trading sessions or till it nosedives in the critical area of 14163-14581(less likely scenario). However, the actions will be very limited and well guarded (preserving the capital and avoiding distraction).
The bulls will have their “say” only when the falling channel (see chart) is broken on the upside. A close above yesterdays high i.e. 15351 is must to break this channel started from 18137(27 Feb). If surpassed, the next target will be the recent falling gap of 15873-16064.
In nutshell, as mentioned in the last report, pending confirmation, we are near to the bottom, at least for the time being. This statement will loose validity if we see wkly close below 14677.
Since the start of the bull run in May 03, the Sensex has touched the baseline (see chart) near the month of May, every year. Apart from that, it has also witnessed a “sell off” of nearly 30-32% every alternate year (2004, 2006 and now 2008). Interestingly, all these falls were violent in nature and in spite of extremely negative sentiments, “doom” public opinion; the Sensex has invariably scaled to the new high subsequently.
Although history has repeated, once again, with so far 30% fall; the outcome could be entirely different. The reason behind this divergent opinion is “breaking” of the base in this month. It is feasible to have a strong comeback from the present fall, but the gravity, depth & “time” factors will be no longer similar to the previous rallies occurred post 30% crash, due to the “damage” to the base line. So now onwards, the road for the recovery will be different. And the biggest damaging factor will be recovery in “small cap and midcap stocks”.
Prima facie, the recovery in small cap and second rung stocks looks doubtful. As such, in the next rally (corrective or continuation of the bullish trend) these stocks will not participate at all or may witness a continuous bear hammering on every rise, making recovery difficult. So within the overall long term bullish trend in the Sensex, we may have a negative trend or a bear market in certain category of the stocks in the near future. Hence the Headline……
