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B. Krishnakumar

SENSEX (3622.3)

Preferred view: The overall outlook for the index continues to remain positive. The Sensex appears to be on its way towards the earlier mentioned price target of 3760. However, the near-term outlook appears slightly bearish and the much-awaited downward correction could materialise this week. A close below 3590 could push the index to the 3400-3440 range. The uptrend towards 3760 could resume thereafter. A move past 3850 could push the index to the 4050-4100 range.

Comments: The movement in the index was in line with expectations. As observed last week, the upward momentum lost steam and the Sensex was confined to a narrow range. The formation of a `Harami' pattern in Japanese Candle Stick charts on Friday indicates the possibility of a short-term downward correction.

Alternate view: As observed in earlier weeks, the recent upward spiral in the Sensex has not completely negated the possibility of a drop to the 2600-2700 range. A break below the 3300 would be an early indicator of the onset of bearish trend and a drop below 3175 (200-day moving average) would provide further momentum to the downtrend.

NIFTY (1138.5)

Preferred view: The earlier view that the index is headed towards the 1220-1250 range continues to remain valid. However, a short-term downward correction appears long overdue. Considering that the earlier corrections to the recent rally have been fairly short-lived and shallow, the correction this time around could be more pronounced in terms of time and value. A break below 1120 would be an early indicator of the onset of correction. Ideally, the index is expected to drop to the 1070-1075 range.

Comments: As anticipated, there was a perceptible slowdown in the upward momentum that was witnessed in earlier weeks. As a result, Nifty failed to make any significant headway in the upside last week. The Nifty continues to be confined within the boundaries of the upward sloping channel that has been referred to in pervious weeks. A break below the lower boundary of this channel (current value 1125) would be a forewarning of the impending correction.

Alternate View: The near-term positive view would remain valid as long as the index manages to rule above its 200 DMA, which is currently perched at 1020. However, the behaviour of the index beyond 1210 would be a key factor that would decide the overall long-term market outlook. For the moment, the possibility of a drop to the 850-860 range is not completely ruled out.

S&P CNX 500 (908.9)

Preferred View: The index comfortably moved past the earlier mentioned target zone of 890-900 range. A high of 915.2 was recorded on Friday before closing at 908.9. The index is expected to embark on a downward correction this week. Some sort of profit booking is bound to pull down the index in the near future.

Comments: In the Japanese Candle Stick charts, a series of `Doji' pattern is noticeable in the last few days. This pattern indicates indecision in the marketplace. The occurrence of a series of such a Candle Stick pattern, especially after a sharp up move, indicates the possibility of a short-term decline.

NASDAQ (1663.5)

Preferred view: The overall outlook for the index does not appear too positive. As observed in earlier weeks, the index appears to be headed towards the 1450-1500 range in the near term. Only a move past 1690 would impart positive trend. A drop below 1590 would be an early indicator of the onset of a downward trend.

Comments: After a weak trend in the first two days, the index gained some momentum on Wednesday. The index again closed on a weak note on Thursday. While a decline to the 1450-1500 range is the normal expectation, a drop to 1550 is the target in the slightly optimistic scenario.

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