The Downslide Gets Steeper

The Sensex broke through support around the 3150-3200 zone to move down. In the last fortnight, the priceline had earlier cracked several important supports at 3450, 3340 and 3280 points. The valley of the previous short term bottom at 3280 was violated, and the continuing downslide could pull the index all the way down to 2800 in the next five weeks.

The short term, intermediate term and long term trends are all dropping in phase. The negative divergence between the Sensex and borader indices such as the Allshares index indicate that the Sensex could soon breach its two year intra day low of 2780 points in February.

 

The Sensex ended at 3101.27, 4.72 per cent below last weeks close of 3254.73. The National Index ended with a somewhat smaller loss of 4.42 per cent. The BSE200 dropped 4.73 per cent.

The broadest Allshares Index continued to plunge, hitting yet another two year low and losing 4.56 per cent. The Weighted Medium cap Index lost 5.69 per cent and the Smallcap index lost a larger 6.8 per cent.

The advances versus declines ratio went down more steeply at 1704 minus, versus 592 plus, with 212 scrips holding value.

The broad signals were thus all negative especially as the larger indices plunged more than the Sensex. Coupled with a dipping advance decline line, the bearish aspect was unmitigated. In the longer term there has been a strong negative signal in that the Allshares index and the Medium-caps and Small caps have all seen far more erosion from their peaks in the last quarter of 1994.

The intermediate trend will remain down for several more weeks. A new bear market bottom could come at between 2750 and 2575 points.

The long term remains clearly negative. The critical upside resistance of 3575 looks inviolate. On the downside, we may see the two year of 2820 points being tested.