Our Comments: Significant top (long term) has been created at 17335 (roof); Intermediate trend is also down; the corrective rally (within the intermediate downtrend) is like to make attempts for recovery, if the Sensex sustains above 15553, towards a target objectives of 15770 or 15950. On the downside 14300-14500 area is likely to act “last resort” for the bulls, if broken; target is 13779 or even 12316.
Actual Movements: The Sensex made initial efforts for recovery and achieved 15770 (actual high 15789 lasted from a minute after strong opening on 18th June 08) i.e. exactly on our target and tanked huge 1632 points (10.34%) in just 4 trading sessions.
Current Week Previewed
Highlight: The long term trend remains bearish (major top at 17735) and recovery in near future is likely to be a trading opportunity rather than investment. Intermediate trend is also bearish; however, the bulls are likely to get some breather if the Sensex is able to close/trade above 14510. Then expect a corrective rally till 14750-14890. On the downside, immediate target for the bears remains same i.e. 13770.
The ongoing “rout” in Indian market is not an exceptional event; but it is a part of “global equity meltdown”. Read about Dow, Nikkei & SSE …...all are sailing in the same boat, only gravity of the fall is different.
The faste
r retracement of previous really (14677-17735) has given its implications with a drastic fall below
the crucial trend deciding zone of 15332, decisively. Since the beginning of the bearish trend in Jan 08, we had witnessed sharp rallies from this level; now it will act as a “major” hurdle for the bulls, due to change of polarity concept. (Support turning into resistance).
As discussed in previous reviews (5th & 25th March), since 2003 (start of the bullish trend) the Sensex has observed “May-bottom” cycle with 30-32% fall occurring at every alternate year (2004 & 2006). In the present fall, the Sensex has broken this phenomenon, resultant a “structural” change after a strong bulls run from May 03-Jan08 of over 18k points rally.
For the intermediate trend, the recent “break away” gap at 15789-15259 will be a major hurdle for the bulls. Previous (such) gaps created on 16th Jan 08 (20203-20079) & on 6th Feb 08 (18509-18274) remains “uncovered”, even today. Hence, considering the overall weakness in the trend, this recent falling gap will be a “major” hurdle for the bulls. In short, till 15789 seen (difficult task), the intermediate trend will remain bearish.
For the near term, the Sensex may give trading bounce if “close above 14510”. This behavior will be in line with usual tendency of markets to do “least expected” moves (i.e. contra moves to that of popular perception). If it does gives a rally (corrective) then expect a rise up to 14750 or 14890.
As a matter of principle, technical analyst studies/reveals the “effects” of price movements, while “fundamental” analyst goes for “causes” of the price movements. The answers for “why (i.e. causes) could be many and will be deceptive or ambiguous; but the answer for “what” (i.e. effects) will be precise and tradeable. It’s all started with “sub-prime”, then “derivative trades, then “inflation” and now “political uncertainty”; after few thousand points fall, the reason would differ, almost certainly.
Sensex (14293) Intermediate trend: Bearish
The faster retracement of previous really (14677-17735) has given its implications with a drastic fall below the crucial trend deciding zone of 15332, decisively. Since the beginning of the bearish trend in Jan 08, we had witnessed sharp rallies from this level; now it will act as a “major” hurdle for the bulls, due to change of polarity concept. (Support turning into resistance).
As discussed in previous reviews (5th & 25th March), since 2003 (start of the bullish trend) the Sensex has observed “May-bottom” cycle with 30-32% fall occurring at every alternate year (2004 & 2006). In the present fall, the Sensex has broken this phenomenon, resultant a “structural” change after a strong bulls run from May 03-Jan08 of over 18k points rally.
For the intermediate trend, the recent “break away” gap at 15789-15259 will be a major hurdle for the bulls. Previous (such) gaps created on 16th Jan 08 (20203-20079) & on 6th Feb 08 (18509-18274) remains “uncovered”, even today. Hence, considering the overall weakness in the trend, this recent falling gap will be a “major” hurdle for the bulls. In short, till 15789 seen (difficult task), the intermediate trend will remain bearish.
For the near term, the Sensex may give trading bounce if “close above 14510”. This behavior will be in line with usual tendency of markets to do “least expected” moves (i.e. contra moves to that of popular perception). If it does gives a rally (corrective) then expect a rise up to 14750 or 14890.
As a matter of principle, technical analyst studies/reveals the “effects” of price movements, while “fundamental” analyst goes for “causes” of the price movements. The answers for “why (i.e. causes) could be many and will be deceptive or ambiguous; but the answer for “what” (i.e. effects) will be precise and tradeable. It’s all started with “sub-prime”, then “derivative trades, then “inflation” and now “political uncertainty”; after few thousand points fall, the reason would differ, almost certainly.
