Sensex (15603.8)
The cacophony in conjecturing the various ways in which the Federal Reserve can act, made many among the market participants retreat to the fence last week. Profit booking near intra-day highs checked the up-moves in the Sensex while short covering in derivative segment prevented a sharp slide. The index finally ended the week on a flat note.
Traders busied themselves with the small-cap stocks and that made the market breadth positive. The BSE small-cap index was the strongest performer last week and is currently poised 2.6 per cent above its July peak. The broader indices such as the BSE 500 and BSE 200 too seem inclined to move higher. FIIs have reversed their stance in September and have already infused $1 billion in cash this month.
The Sensex did a commendable job of holding steady despite being buffeted by a host of negative tidings last week. But the momentum has slowed down significantly due to the protracted sideways move recorded over the last two weeks. Since corrections can either be shallow and long-drawn or deep and short-lived, let us hope that the correction this time around belongs to the former category.
The wave counts have not altered this week. The move from the 13780 trough could have one more leg upwards that can take the Sensex to 16025 or 16307. But the index can fluctuate in the range between 15300 and 15850 for a few more sessions before a break-out occurs. A fall below 15200 is required to negate the positive outlook for the short-term.
Though the short-term outlook is positive, medium and long-term investors need to exercise caution as the zone between 16000 and 16400 is a potent long-term resistance.
With the Sensex positioned just a stone’s throw away from recording a new high, excitement is running high. The movement next week could stay choppy with the Sensex moving in a band between 15350 and 15900. Move beyond the upper boundary would take the Sensex to the next milestone at 16025. Supports below 15350 are at 15211 and then 15043.
Nifty (4518)The daily candle-stick chart of the Nifty last week has a plethora of bearish patterns, a hanging man, followed by a grave-stone doji and two shooting stars. If that hasn’t rattled traders, nothing else will. The Nifty can move around in the band between 4450 and 4650 next week. A dip lower to 4450 or 4408 is possible in the early part of the week. A reversal above 4400 would provide good buying opportunity for traders.
The upper targets for the week are 4582 and then 4636. Move beyond the second target can propel the index to 4716. The outlook for the short term stays positive as long as the index stays above 4360. Support below is at 4223.
Global CuesGlobal markets pulled back from the lows last week on rising hopes of a benign Fed stance. The DJIA has, however, not yet risen above the resistance at 13500. But chart patterns indicate that the index can try to get back towards 14K soon. Markets in Asia are in the wait-and-watch mode prior to the FOMC meet. The only exception being the Hong Kong market, which soared to new highs.
Nymex crude retreated from its intra-week high of $80.3 to close the week at $79.1. Since the current rally is the fifth wave from the January low of $49.9, the short-term target is $84.4. This target is achievable if the commodity stays above $76 in the near term.