Major Indices :: Sensex : 15923 ::Nifty : 4800
Intermediate Trend :: Bearish
Key Technical Levels :: 16253- on the upside ::15173- on the downside
The intermediate downtrend started in the Sensex from the recent high (21206) is ‘still’ intact. Since 10th January, i.e. in the last 9 weeks, the Sensex has lost 5900 points i.e. almost 28%. However, as discussed in the last report, it’s a usual affair for the Sensex to shed around 30% of the value, form its previous top, in the month of March/ May, for the last 2 years. Will it be different this time?
One of the most basic assumptions of technical analysis is that “the market discounts everything well in advance”. The market (prices) moves well ahead of any news or event, rather than following it. The reason behind the recent fall (as claimed by media and various market participants) is “recession in US”. If you observe minutely, the Dow has fallen 17.5% in the last 5 months (top made in Oct 07), whereas Indian equities had gone overboard and fell 28% that too in just 9 weeks. Now it is quite possible that, the Sensex, being already discounted (further) the bad news/negative clues, now will stabilize here for few weeks, before making a fresh comeback.
The markets make a “top” when there is an excessive euphoria in the system, coupled with complacent attitude. (How come a highly capital intensive business likes “power generation” will multiply the money in 2-3 weeks time? No one has bothered…). Similarly, the “troughs” are associated with panicky situations with distress, fear and destructive attitude among the investors. Current environment is idle for troughs. Will it?
It’s still a question mark. The things can improve a lot if the Sensex sustain and trades well above 15063-15173 mark for the next few trading sessions. On the upside 16253-16754 is an ideal battle ground for bulls & bears. Aggressive traders should utilize sharp corrections to build short term longs, with a stop beneath 15300. Long term players, with a view of more than 6 months, can put 10-15% of the equity to buy the frontline stocks, but only on a sharp corrections/intraday falls.
