The Diwali Dampener

Right now the short term trend is negative, and the intermediate trend cracked a serious support so it may also have turned negative. The long term trend of course remains down.

The advance decline line dropped back into the negative zone after going positive after the credit policy. The intermediate trend is thus likely to change to negative because although it has not yet gone into the confirmation pattern of dropping bottoms it has broken strong support with a negative A/D.

The Sensex would have confirmed a continuing uptrend if it stayed above the well-established support zone around 3175 points. Ideally it ought to have crossed primary resistance at 3280 and then gone past 3345 to continue a powerful upmove. Instead it closed well below 3175 after yo-yo movements around that area. To confirm another intermediate downtrend, purists would demand a drop below 2940 points. However, trading has been rather choppy in the last three weeks and the intermediate trend is, at best, neutral.

 

The Sensex ended at 3148.57 which was a 3.15 per cent loss from last weeks close of 3250.66 points. The Natiex ended with a smaller loss of 2.92 per cent and a closing value of 1403.41 points. The Dollex posted a 2.89 per cent loss, while the BSE200 only lost 2.72 per cent while the rupee crept downwards.

The broadest Allshares Index finished the week with a loss of 3.08 per cent and the other broad indices also behaved negatively. The Weighted Medium cap Index lost 2.35 per cent and the Smallcap index lost a larger 4.51 per cent.

The weakening advances versus declines ratio would have been balanced out normally by a strong rise in trading volumes. However the volumes are skewed this week because trading shifted from the NSE to the BSE due to the satellite failure. So they can be safely ignored, unless they persist even after the NSE is fully up and running.

This week, 494 scrips gained versus 1475 losers. Only 140 actively traded scrips held their value. All of 4109 scrips were untraded -- a sign that there is still a long way to go for a full fledged bullrun.

Summing up, the critical chart point for a long term reversal is still 3575 points on high volumes. The intermediate trend should go positive if it jumps above 3345 and negative below 2940. The short term trend is negative. On the upside there is resistance at 3175, 3280 and 3345. There is also downside support all the way from the current values down to 3000 points.