Sensex (14424.8)
Global markets partied last week as the spectre of a financial crisis started dissolving in to the background. The Sensex was, however, held back from joining in the celebrations thanks to the pandemonium on the political front. The Sensex managed to close the week in the green though its mid-cap and small-cap peers closed the week with losses.
Subdued volumes and deteriorating breadth recorded last week indicate that investors are biding their time, waiting for the volatility to subside. Cash market sales by FIIs also petered off as the week progressed. The focus will once more turn to the derivative market next week as the long-drawn August series draws to a close. Low Nifty put-call ratio points towards squaring of short positions and the oversold nature of the market.
The Sensex went nowhere last week, charting a symmetrical triangle pattern. The 200- day simple moving average line is acting as a buttress in dips. The oscillators in the weekly chart are rather precariously poised. But the 10-week ROC needs to move deeper in to the negative zone to signal the onset of the third leg of the correction that commenced at 15863. The daily oscillators are implying a short-term rally in the offing.
As explained last week, the 13780 level from where the Sensex reversed the previous week is a significant intermediate support. If the 13 per cent down-move in the Sensex is just another bull-market correction, it can halt at these levels. The strength in the subsequent rallies should help us know if the correction has already ended or if it will have more ‘legs’. Investors need not fret as long as the index rules above 13140.
The trend would continue to be indecisive in the short-term with the Sensex confined to a range between 13800 and 14800. The Sensex will attempt to move higher to 14680 or 14882 next week. A close above 14882 is required to make the short-term outlook positive for the Sensex again. Supports for the week would be at 14063 and then 13759.
Nifty (4190.1)Nifty managed to hold above the near term trough at 4002. The 200-day moving average positioned at 4076 needs to be closely watched now. A close below this line will weaken the bulls considerably.
A minor rally can be expected next week to 4240 or 4320. A close above the second target would signal that the short-term trend has turned positive again. Conversely, a reversal below 4240 would drag the index lower to 4098, 4003 or 3895.The medium term outlook is neutral and clear direction would emerge only when the index moves out of the range between 4000 and 4300.
Global Cues
Global markets were firmly on the road to recovery last week. Some Latin American markets such as Brazil and Chile have already retraced almost 61.8 per cent of the correction. Among the Asian countries, Hong Kong and China led the upward surge. Other Asian markets in Japan, Taiwan, Thailand, Indonesia, Korea etc. put up a more subdued performance.
Europe is still struggling. Dow staged a good fight-back last week. It is poised just below the resistance at 13500. A move beyond would mean that the correction has been brought to a close