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B. Krishnakumar

SENSEX (3676.3)

Preferred view: The index inched closer to the immediate level of 3760 that has been emphasised in the past few weeks. After touching a high of 3714.8, the index closed on a relatively weak note at 3676 on Friday. The index could seek the near-term target of 3775-3810.

However, a drop to the 3450-3475 range appears likely in the near term. A close below 3600 would be an early indicator of the onset of the downward correction. On the contrary, a break above 3850 could pave the way for a rally to the 4050-4100 range.

Comments: Except for a sharp rally on Thursday, the index remained range-bound during the week. While the waning upward momentum is clearly visible, the much-awaited downward correction is still elusive. Considering the recent rally has been devoid of any significant downward correction, the expected retracement this time around could turn out to be quite deep.

Alternate view: The index movement in the recent weeks has validated the earlier view of a rally to the 3760 level. However, this has not completely negated the original view of a drop to the 2500-2600 range. The momentum and price structure beyond 3760 would be critical in determining the long-term view about the index. As of now, only a move past 4900 would completely negate the possibility of a drop to the 2500-2600 band.

NIFTY (1161.7)

Preferred view: The index moved closer towards the target level of 1220-1250. The price movement in the recent days is indicative of a steady slowdown in upside momentum. The much-awaited downside correction could be just round the corner. Ideally, the index is expected to drop to the 1070-1080 range. A drop below 1145 would be an early indicator of a drop to the above-mentioned range.

Comments: Led by technology stocks, the index managed to rule firm on Thursday. The index generally ruled weak on the remaining four days of the week. The formation of a `Doji' pattern on Friday after a long white candle on the previous day is a classic "Harami Cross" pattern in Japanese Candle Stick parlance. This indicates that the market is in a state of indecision after an upmove on Thursday. A drop below the day's low of 1145 could trigger a downward correction.

Alternate view: While the earlier view of a drop to the 850-860 range may now seem far-fetched, such a possibility is not completely ruled out as yet. As mentioned last week, the behaviour of the index beyond the 1210 level would provide a valuable clue about the long-term trend.

S&P CNX 500 (915.5)

Preferred View: The movement in the index was in line with last week's expectations. The index ruled weak and was confined to a narrow range. Including Orchid Chemicals, Indian Rayon, ABB and Aban Lloyd, quite a few mid-cap stocks were pegged to lower levels during the week. Profit - booking in these stocks kept the index at bay during the week.

Comments: In the Japanese Candle Stick charts, a `gravestone doji' pattern is noticeable on Friday. A `doji' pattern is indicative of indecision at the market place. The occurrence of this pattern after a steady uptrend indicates the possibility of a further drop in the index. On the downside, the index could seek support around the 800-810 range.

NASDAQ (1733.9)

Preferred view: Contrary to expectations, the index ruled firm. However, as anticipated, the move past the resistance level of 1690 imparted bullish momentum. The index could move up to the 1875-1900 range in the near term. Only a break below 1590 would impart bearish trend in the index.

Comments: Except for a drop on Thursday, the overall sentiment remained firm. The index not only managed to hold above the bearish trigger level of 1590, but also broke the bullish trigger level of 1690. This is a positive indicator that could provide the necessary impetus for a further rally from current levels.

(Note: The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Analysis and price targets are based on the Elliott Wave Analysis. There is a risk of loss in trading)

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