Daily Market Trend Guide -- Friday, December 09, 2011 (Published in the morning before the Markets opened)

MARKET TREND FOR TODAY                                                     December 9, 2011

Yesterday’s the Markets had a terrible session with the external as well as the internal worries weighed down the technicals as the Markets ended the  day with sharp cut. The Markets opened moderately weak and after briefly trading with capped losses, lost further ground. A feeble attempt to recover was made in the afternoon trade, but that soon gave up as the Markets went on to give the day’s low of 4921.45. It ended sharply lower at 4943.65, posting a loss of 118.95 points or 2.35% forming a sharply lower top and lower bottom on the Daily High Low Charts. Volumes remained moderately higher than the previous session.

Today, there are several contradictor readings on the global front as well as technicals. For today, expect the Markets to open initially on a lower note following weakness in global markets and then look for directions. For today, the levels of 4880 and 4865 are technical support levels whereas on the higher side, the levels of 5010 and 5045 are technical resistance levels. 

The RSI—Relative Strength Index on the Daily Chart is 47.9775 and is neutral as it shows no negative divergence or failure swing. The Daily MACD is still bullish as it trades above its signal line. 

Apart from the above technical reading, the worries from the Euro zone and the putting of FDI in retail on hold has thrown a larger question mark on the reforms that are facing serious political hurdles which are seen as factors that will further add to slowing down of growth. Again, on the other hand, the food inflation has seen 39-month low which is a positive sign.

Amid these technical reading, which shows no negative breach, the global and internal factors remain contradictory with negative bias. However, again most of the NIFTY components have shown addition in Open Interest along with the fall yesterday, indicating creation of short positions. However, taking view of all the factors mentioned above, the Markets are likely to weigh caution ahead of important news flow from Europe, weekend in between, IIP numbers coming in on December 12, and RBI Policy announcements which is expected to stop raising the rate which would add fuel to the fury.

So, this time, heavy caution outweighs the technicals but at the same time, there are large number of shorts in the system. It is important to note that the Markets are less likely to trade purely on technicals but would get dominated with the news flow and external as well as internal factors mentioned above. It is strongly advised for a retail investor to keep away from aggressive positions and refrain from shorts as there are chances that we see mild technical pullback after weak opening. Also, amid any kind of slightest positive news flow, we may see sharp short covering as witnessed in the previous week. Longs should be taken very selectively. It is also strongly advised to avoid creating fresh positions and maintain liquidity to absorb volatile movements in the Markets which are driven more by the external news flows rather than technicals. Overall, cautious outlook is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
www.MyMoneyPlant.co.in    
http://milan-vaishnav.blogspot.com
+91-98250-16331
milanvaishnav@mymoneyplant.co.in
milanvaishnav@yahoo.com