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The Markets had a very volatile session moving 50-60 odd points in either direction twice as it ended the day with moderate losses ahead of a trading holiday yesterday and in the process have formed a lower top but slightly higher bottom on the Daily High Low Charts.
However, the volumes on Wednesday have remained dismally low which is, isfact, a positive sign as it indicates less participation in the consolidation stage.The Markets have, so far, held the support levels in the range of 4720-4740 in the form of triple bottom.
For today, expect the Markets to open on a strong note and continue to remain so in the morning session. In order to capitalize on the positive opening, the Markets will have to open on a stronger note and thereafter, sustain its positive trajectory and will have to be supported with volumes.
The RSI—Relative Strength Index on the Daily Chart is 36.9934 and it has reached its lowest value in last 14-days, but it does not show any negative divergence. The MACD on the Daily Chart is bearish as it trades below its signalline, but is moving towards giving a positive crossover again.
The Markets have shed very nominal open interest which shows no significant unwinding has been done. Also, the Markets have held the triple bottom supports of 4720-4740 three times and this has now become immediate supports for the Markets.
Further to this, the low volumes in last two sessions have further brightened the return of stability and some pullback today as there have been minimal participation in the Markets.
All and all, given the very much favorable technicals and supported by positive global cues, the Markets are set to open on a stronger note and remain so for the rest of the session critically depending on the trajectory as well as the volumes. Stock specific purchases will continued to be seen. While protecting profits at higher levels, positive caution is advised.
MARKET TREND FOR TODAY – A SPECIAL NOTE October 05, 2011.
The Markets had a terrible session yesterday wherein the NIFTY came off over 150-odd points from its day’s high to touch the low of 4728.30, but recovered a bit to end the day at 4772.15, posting a loss of 77.35 points or 1.60%.
Having said this, we wish to draw attention to certain important points.
Yesterday’s panic reaction came in after Moody’s announcement to downgrade SBI. It is important to note that the Moody’s downgrade is nothing but a convenient and dishonest and bias view of the system for ones own convenience. As very nicely analysed by many of the good fundamental analysts, Moody’s downgrades is likely to draw flak as some of the European banks whose conditions is much worse than SBI enjoys better rating by Moody’s. This raises question mark over authenticity and transparency of Moody’s policy and methodology. SBI just did not deserve such a downgrade and would have certainly escaped this downgrade had that been a “European Bank”.
It is very important to note that this juncture that such uncontrolled announcement by such rating agencies have always acted as a convenient measure for FIIs who themselves indulge in bargain hunting after such sharp reactions. It is only the retail investor that gets hurt in such an event. It makes the picture more evident that the Markets are mainly controlled by few big entities and they sharply influence the Market movements as per their own convenience. One fails to understand what wrong can happen to our economy “to this extent” when a bank goes bust in Europe!!??
As always happened in the past, such doubtful timings of announcements have done more bad than good for anyone.
Coming to today’s Markets, expect the Markets to open on a mildly positive note and look for directions. It is likely that we see respite from yesterday’s violent behaviour and see some recovery.
The Markets have closed at a very critical juncture and the levels of 4720 -4740 have now acted THRICE as Triple Bottom Support for the Markets and it is critically important to see that it trades above these levels. For today, the levels of 4825 and 4960 are likely to act as resistance the levels of 4740 and 4710 are likely to continue to act as major supports.
The RSI—Relative Strength Index on the Daily Chart is 37.8403 and it shows no failure swing. The Markets have made its new 14-day low whereas RSI has not and this is BULLISH DIVERGENCE.
All and all, it is important to note that the Markets, when faced with such external and few-entities-controlled circumstances, tends to defy technicals, but normally technicals do take over and it is best advised to sit through such circumstances. It is likely that we see some stability returning to the Markets. Though fresh purchasesor shorts may be avoided, it is strongly advised to maintain liquidity to hold on to positions. Cautiously positive outlook is advised for today.
The yesterday’s session remained disappointing as the Markets opened gap down and remained so for the entire session moving in a very narrow 25-odd point range to end the day with losses and in the process have formed a sharply lower top and lower bottom on the Daily High Low charts.
Today, we may expect the Markets to open on a moderately flat note and look for directions and we can also expect the Markets to see some respite from the weakness that it saw in the last two sessions.
With the Markets expected to open today on flat to moderately mild note, the levels of 4810 and 4870 are likely to act as supports and the levels of 4895 and 4925 are likely to act as resistance on the upper side. Along with intraday trajectory that the Markets form, the volumes too would remain critical to decide the trend today.
The RSI—Relative Strength Index on the Daily Chart is 41.0800 and it shows no negative divergence or failure swing and is therefore neutral.
The Daily MACD has turned bearish as it has again reported anegative crossover and it now trades below its signal line.
At this juncture, it becomes important to note two points. First, the Markets have been trading in a very broad trading range of 4720-5170. And within this range, it has been moving in either direction without any domestic triggers just recklessly following global cues. Also, the Markets have been showing total defiance to technicals and is “controlled” by few big FIIs. This is vindicated with the gap up and gap down opening and then trading around those levels for entire session. This clearly shows artificial trade pattern, wherein an analyst has very little to analyze. Also the volumes have been lower which is a positive sign for Indian Markets.
All and all, we again reiterate to refrain from shorts as no intraday gap/movement is expected. These levels may be used for selective purchases. Cautious optimism is advised as no structural breach on chart is reported.
The Markets had a disappointing session on Friday, wherein it consolidated in the first half of the session and even traded briefly in the green, but pared all of its recovery in the second half as it ended the day losing 72.20 points. However, the Markets did so on lower volumes and in the process formed a lower top but higher bottom on the Daily High Low Charts. With this, the Markets have ended the week with net gain of 75.50 points or 1.60%.
For today, expect the Markets to open on a negative note and look for directions and today's movement / trend would depend very much on the intraday trajectory that the Markets form post opening. Today, the Markets are likely to remained weighed down by global factors more than the domestic factors in the initial session.
However, at this point, it is important to note that the Markets have ended the Week with gains and it is trading in a broad trading range, and thus it is very much showing resilience to the global developments.
For today, with the Markets expected to open on a negative note, the levels of 4905 and 4860 are again likely to act as supports.
All lead indicators continue to remain in place. The RSI--Relative Strength Index on the Daily Chart is 45.4604 and it is neutral as it shows no negative divergence or failure swings. The Daily MACD too remains bullish as it trades above its signal line.
On the Weekly Charts, the RSI is 38.7739 and it shows no negative divergence or failure swings and it continues to remain neutral.
The NIFTY Futures have added 2.5% in Open Interst and this shows the Markets have again added short positions in the system as it also trades at discount.
Given all these reading, it can be fairly concluded that the Markets have offlate been behaving in defiance of technical indicators and it often happens when it gets affected with external factors. It also continues to trade in a broad range.
All and all, it is continued to be advised to refrain from shorting as the Markets have been directionless and in a broad range. Given the short positions, it is also likely that the Markets see some improvement post opening in the second half of the session. Stock specific activity may be observed. While avoiding shorts, and maintaining liquidity, cautious outlook is advised for today.