Bulls lack buying conviction

TECHNICALS

The markets opened on a positive note and proceeded to end the day with a big loss. The benchmark indices lost a little under 2 per cent. Traded volumes were lower than the previous session which shows an absence of panic sales.

Market breadth was highly negative as the BSE and NSE combined figures were 635 : 2814 and the capitalisation of the breadth was also negative as the figures on a BSE & NSE combined basis were Rs 1056 crore : Rs 7418 crore.

The F&O figures of the previous session show an unwinding of long positions ahead of the August series expiry and a very marginal squaring up of short positions - signalling a continued bearish bias.

The indices have breached the 15-week long bullish channel and closed conclusively below it. The momentum is clearly negative and the momentum oscillators have confirmed the bearishness and further downsides are very likely.

As advocated yesterday, the 2355 level once violated downwards caused a rapid slide. I feel the 2293-2304 levels will be distinct possibility in the coming session.

The upsides resistance will at 2361 level, which will be a major intra-day hurdle for the Nifty in the coming session. Traded volumes are so far in an acceptable pattern, but a fall in the markets with higher volumes will see an accelerated fall in the near term.

Trading highlight - the Nifty has fallen below it's rising channel for the second time in four weeks. The previous fall was on July 14 and 15, 2005.

The fall this time is with confirmation by the oscillators and a rough and ready support as per retracement theories is at the 2304 mark

The outlook for markets on Wednesday is that of absolute caution and as I had forecast, the bulls are likely to continue displaying a lack of buying conviction at lower levels. The only significant cushion to the fall will be short covering by bears at lower levels.

Vijay L. Bhambwani
(CEO- BSPLindia.com )

The author is a Mumbai based investment consultant and invites feedback at vijay@BSPLindia.com  or ( 022 ) 23438482 / 23400345.

SEBI disclosure: the analyst has no exposure to the scrips mentioned above.