Daily Market Trend Guide -- Tuesday, September 08, 2015

MARKET REPORT                                                                           September 08, 2015

We had categorically mentioned that the Markets faces the chances of selling off from any pullback and yesterday’s session remained precisely on those dotted lines. The Markets saw a positive and better than expected opening in the morning and traded with modest gains in the early morning trade. At one point of time, it perked up and formed the day’s high of 7705.05 in the first hour of the trade. It was in the late morning trade that the Markets witnessed vulnerability at higher levels. It gradually pared all of its gains and traded modestly in the negative. Until late afternoon trade, the Markets traded more or less in sideways trajectory trading in a capped and narrow range. The last hour of the trade saw some more weakness creeping in and the Market slid further to form the day’s low of 7545.90, sliding nearly 160-odd points from the high point of the day. It finally ended the day at 7558.80, posting a net loss of 96.25 points or 1.26% while continuing to form a lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR TUESDAY, SEPTEMBER 08, 2015

Today, we can fairly expect the Markets to open on a modestly positive note and attempt / show some technical pullback. However, it is very important to note that given the weak technical fabric of the Markets, any pullback that we see today, or in immediate short term, will more be attributed to short covering. For the Markets to form solid base and bottom we need buy volumes and this is what it has been missing since last couple of session. With any pullback, the Markets continue to remain vulnerable to sell-off from higher levels.

For today, the levels of 7610 and 7650 will act as immediate resistance for the Markets. The supports come in at 7540 and 7510 levels.

The RSI—Relative Strength Index on the Daily Chart is 29.3788 and it now once again trades in “oversold” territory. Though it does not show any failure swing, it certainly shows Bullish Divergence as the NIFTY has formed a fresh 14-day low but RSI has not. The Daily MACD continues to remain bearish as it trades below its signal line.

On the derivative front, the NIFTY September futures have added over 3.77 lakh shares or 

1.63% in Open Interest indicating fresh addition of shorts. The NIFTY PCR stands at 0.95 as against 0.96 yesterday.

Coming to pattern analysis, the description remains more or less on similar lines. The Markets failed to fill up the gap it created in  August and decline further to fall past its previous lows. Today, on back of addition of short positions in the system and the Markets getting oversold on Daily Chart see some short covering coming in. However, it would take more for the Markets to form a base and potential bottom at these levels. For the Markets to form base at these levels, it will have to show pullback not just on short covering but also on fresh buying coming in. Recently, the Markets have also been falling on back of very less supportive buy volumes over and above the selling pressure that it witnesses.

All and all, the Markets still remain in doldrums and any pullback that is likely today should not be construed as a bottom formation unless the Markets shows definite signs for that. So far as fresh purchases go, the medium term investors can start deploying some 20.30% of their available funds while sitting mainly on cash. Overall, even with some solid technical pullback, utmost caution is advised at higher levels.

Milan Vaishnav,
Consulting Technical Analyst

Af. Member: Market Technicians Association, (MTA), USA
Af. Member: Association of Technical Market Analysts, (ATMA), INDIA
www.EquityResearch.asia
http://milan-vaishnav.blogspot.com

+91-98250-16331
milan.vaishnav@equityresearch.asia
milanvaishnav@yahoo.com