Short term weakness in store

B.Krishnakumar

The overall market sentiment was distinctly weak during the week gone by.

The unimpressive economic data coupled with earnings warning from companies such as Ciena, JDS Uniphase and Lucent Technologies also affected the overall market mood. As a result, the US markets witnessed sharp decline. The drop was amongst the biggest weekly decline since the September 11 attacks.

For the week, the Nasdaq Composite Index logged a decline of 3.4 per cent while the Dow Jones Industrial Average dropped by 2.4 per cent. The S&P 500 came down by 3 per cent during the week.

Technically, the medium term outlook for the Nasdaq Composite Index continues to remain positive. Though the expected rally did not materialize last week, the index still has the potential to move towards the 2200-2300 range.

However, the recent weakness is likely to persist in the near term. The Nasdaq Composite index is likely to face resistance at around the 1970-1990 range. On the downside, support lies at around the 1800-1850 range.

In the bigger picture, a decline below 1750 level would negate the possibility of a rise towards the 2200-2300 range. In any case, the Nasdaq Composite Index is likely to recede towards the earlier low formed at 1387 once the ongoing rally dissipates.

(Note : The analysis and opinion expressed in this column is based on the technical analysis of the past price behaviour. Analysis and price targets are based on Elliott Wave and Point & Figure techniques. There is a risk of loss in trading)