Out Of Doldrums?

Paradoxically, the collapse of Insat-2D might actually have helped fuel a recovery. The lack of trading on the NSE makes it difficult to extrapolate with any degree of confidence. But, basing opinions purely on the trading patterns at Dalal Street, it appears that the market has started to pull out of the intermediate downtrend that started on August 7. This week saw gains on pricelines coupled to bullish background and breadth indicators. Traders switching exchanges and covering shorts because of the NSE being hors de combat for five sessions must be at least partially responsible.

The Sensex rose throughout each session this week in trading thatseemed to be getting sucessively stronger. From the chartists angle, the market witnessed a vital break in the bearish pattern of lower bottoms when it rose from 3850 points on Monday. It also saw the market breach several resistances including the important barriers at 3925 and 4015 points.

 

The Sensex ended the week on 4057.37 points which was a gain of 210 points and 5.44 per cent. The Dollex went up by 3.79 per cent while the BSE200 rose 4.05 per cent. The rupee slipped marginally, but it seems to have stabilised which should bring back FIIs. Also domestic interest rates remain soft and show every sign of dropping further which would help domestic investors. The Nifty ended at 1163.55 points after two trading sessions.

Other segments of the market also did reasonably. THe BS-Midcap 100 weighted Index rose 2.42 per cent, while the BS-MIdcap 250 imporved marginally by 0.72 per cent. The BS-smallcap lost ground by 0.43 per cent. The ratio of advances to declines was also healthy with 616 scrips advancing while 573 scrips declined. Of course, trading remained thin with nearly 5000 scrips untraded. Volumes were good and improved through the week, which is another bullish signal. This could simply be NSE operators switching exchanges in desperation however.

Right now, the short term trend is obviously up while the intermediate downtrend shows signs of reversing direction as mentioned earlier. The key factor in both cases is the establishment of a pattern of rising bottoms. The last bottom had come at 3770 while this time there was support at 3848 points. Its also true that the market has established rising peaks on the short timeframe as well since it broke past 3925. The next resistance is around Fridays closing values while there is stronger band of selling pressure at 4130 points.

It maybe premature to expect the market to promptly reach for the heights of 4500 plus again. For one thing, the lack of action on NSE makes all patterns currently suspect. Then there is the historic pattern of weak and lacklustre trading around the Diwali period. Also, intermediate trends remain operative for anything upto 12 weeks so the August 7 downmove could still be in force. Anyhow the reversal in intermediate trend cannot be considered confirmed by any means. It would be very good if 4130 was breached in this upmove.

The long term trendmust remain up by definition. Not only did the market make an upomve, it did not even test the vital zone of 3575 -3750 on the downside. As stated earlier, the market trend will remain bullish so long as that zone of support is extant. The long term trend would only reverse with a breach of 3575 points.