Market Overview : on 23rd of july our markets made a new high for the whole rally, which actually started in oct-2008, but picked up the real momentum in march-2009.
Nifty made a high of 5477 and the sensex touched, 18237.
same day, if you remember, I passed on a message that nifty is at an important resistance of 78.2% of the entire 2008 crash.
I had shown this level on a chart of sensex.since that high, nifty has retraced by more than 100 points and looking at yesterdays 158 points crash in dow, monday could breach a very important nifty level of 5348.
if on monday-tuesday, nifty closes below 5348, than we may soon see 5215 -5236 again.
5171 for nifty and 17371 for sensex is the most important trend decider level for next 1-2 weeks.
In the last 2000+ points sensex rally, the leaders were larsen and hdfc duo.
Leaders like tata steel and icici and reality sector stocks like dlf and hdil jumped significantly,
BUT ….looking at their structure of rise in last 1-1.5 months, I feel that these rallies were only corrective in nature.
The fall in these stocks from april -10 was very severe and they may again start falling fast.
Early, this week, I had sent a sensex chart which showed a BEARISH pattern,, which is technically called a rising wedge.
Since , than including on friday, sensex has fallen by more than 350 points.
As shown in another weekly chart of sensex, this BEARISH RISING WEDGE pattern in far more clearly visible on sensex weekly charts.
The minimum target for this pattern is the starting point, which is 16000...lets see how market reacts further to this
Further, cause of worry is the NEGATIVE DIVERGANCE in one of leading indicator called ROC.
AS shown in the attached chart, THE ROC has failed to reach newer highs as sensex did.again this has bearish implication.
The stochastics on daily charts is in oversold zone, so the markets will try to bounce back from around 5236-5215, so it will be a crucial rise to watch.
LAST ,but not the LEAST...the channel. As shown markets are in a channel since oct-2009,,as commented on one chart
2010 could either prove tobe a year of distribution or consolidation, depending upon the CHANNEL breakout.
Chances still weigh in favour of downside break, by 70:30.
if this channel is broken on the downside, the correction could be deep upto 4200 nifty level, and the entire fall could last for 8-13 months from the startting time.