Hi Friends,
After a subdued trend in the last few sessions, the market staged a solid comeback on Friday. The start of coming week is likely to see continuation of the DOW induced surge to dominate the markets. Friday's blaze of glory may be just be carried forward on Monday. The rise on last Thursday and Friday have completely changed the status of daily indicators which have turned up from lowest levels to generate buy signals although weekly indicators have not yet generated a buy signal and may indicate if this week ending 26th Sept. closes strongly higher than week ending 19th Sept. Most likely the first half of the week may see good up move, to be followed by giving up much of the gains during the second half of the week.
It seems Monday and Tuesday are going to be strongly positive days by which time nifty may cross 4400 to 4450 levels. If one has a look at the daily EOD chart above, nifty may make the 5th attempt to test the sloping resistance line this time around 4400 to 4450 levels possibly on Monday or Tuesday. Sustaining above 4400 to 4450 or 14575 to 14750 levels in case of SENSEX for 2 to 3 days can easily take nifty to 4650 or SENSEX to 15500 levels after crossing major resistance of 100 DMA around 4475 and 15000 levels. However, a failure to close decisively above this resistance line around 4450 or 14750 will bring the indices down to make a new low in October. Long position holders may do well to liquidate their long holdings gradually around this level of 4450 to 4480 or 14750 to 15000 for SENSEX. In the chart above, 20 and 50 day moving average cross over is around 4300 & 14300 levels. This cross over, most of the times attracts the prices towards it to breach it, only to fall again. During this up move, a false sense of optimism may be generated that bull phase has resumed only to be followed by another big fall as in all the earlier cases since Jan 08. Many stimulus packages to boost US markets will come and go like the ones you have been seeing since Jan 08 and the present one is nothing special, but after every follow up bounce, markets will resume its natural path of bear run. One must take full advantage of this short term bounces to make good profits. For trading on Monday, the opening of indices will depend mostly on Asian markets and SGX nifty. Expect a gap up open above 20 and 50 days moving average cross over around 4300 or 4330 levels. In case of luke warm positive or flat or weak Asian markets which look most unlikely, expect nifty to find support around 4200 & then around 4133 below which panicky could set in to take nifty towards 4024 or lower levels. Index heavyweight reliance will lead the charge as Mukesh Ambani makes some significant announcement on Sunday. While the going gets good, remember, good times don't last…tough people do. To READ Rakesh Jhunjunwala's (
http://brokersreport.blogspot.com/2008/09/rakesh-jhunjunwala-interview-with-cnbc.html
The last week, the existing financial system was put to the severest of the test and it almost snapped before change of rules midway through the game, gave the regulators some breathing time to fix the leaking taps. The fed gave up its resolve not to come to the rescue of the ailing financial institutions, after AIG seemed to be sinking the whole ship. While Lehman filed for bankruptcy, a rope worth $85 billion was thrown at AIG and suitor was found for Merrill lynch in quick speed time. And sensing that even that was not helping, Uncle Sam threw his smashed hat in the money market mutual fund ring as well and then announced his mega plan of buying distressed assets from the banking systems, contours of which could be chiseled over the weekend. But the remedy that really helped the markets get a much deserved breather was the banning of shorts by sec till October 2. If people are thinking, that the mechanism m/s Bernanke and Paulson are putting in place, will wave a magic wand over the financial woes and the markets will sky rocket, think again. The buoyancy could last a few sessions, but once the shorts are allowed to be back in the system or another branded cookie crumbles, the markets would be back on their beaten track heading south.
We have the f&o expiry to add to the volatility. The sun outage later in the week may bring indices to a frustrating range later. It's better to trade in intraday and limit leverage positions.
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