The market reacted at higher levels in a week full of holidays. Amazingly the NSE and BSE between them managed to pack in
8 sessions and one or the other was open everyday. The Sensex reacted from a high of 4226 points to settle at 4118.29 on Friday. The key NSE index the Nifty closed at 1209.60 points on Thursday after recording huge trading volumes. In the process, the main
market indices both consolidated above important levels.
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Assuming that the trend on Dalal Street would have been reflected on the NSE if it hadnt been closed, a short-term reaction may have started. But the intermediate and long-term picture both showed healthy signs. It seems we are in the first wave of a new bull-market.
The Sensex ended the week up by 1.03 per cent, while the Nifty was up by 3.08 per cent on Thursday. Resistance around the 4150-4225 zone was tested throughout the week but not with great success. the supply at those levels is still formidable. However the market appeared to find support above the 4100 point mark which is itself quite an achievement. The Nifty confirmed an earlier breakout in the Sensex by going past the 1200 barrier on high volumes. The Dollex gained 3.38 per cent despite the rupee weakening.
Other indices also showed clear gains. The Bs Midcaps-100 went up by an enormous 12 per cent and this index which tracks the largest Medium-Caps has now risen 55 percent in eight weeks. The BS Midcaps-250 rose 6.24 per cent. The BS-Smallcaps Index rose 10.4 per cent. The Allshares Index which tracks 3500 scrips rose 11.38 per cent. The Advance-Declines ratio was positive with 1275 shares up and 210 shares down. Trading volumes were also excellent indicating that the breakout came on solid demand. The breadth of the bullishness is obvious from the fact that broad-based indices have moved more than heavyweights. This may in fact, have been a key week.
The short-term trend has probably gone negative with the aforementioned reaction. currently there is support around 4100 but higher badla charges may force unloading next week. In this current short-term reaction a drop to the strong support at 3990 or secondary support at 3890 would not be unlikely.
The intermediate trend still looks positive though it must be close to maturity since the market has registered higher peaks and valleys since the bottom in late January around the 3165 points-level. Intermediate trends rarely last more than three months, so there should be an intermediate correction fairly soon. The market now looks overbought on short-period oscillator signals and a post-Budget drop would not really surprise.
The long-term trend is looking stronger and stronger. All the confirmatory signals are falling into place. Breadth has increased. The A/D ratio has been stable and positive for a while. The Moving Average crossover systems have emitted confirmatory buy signals at both daily and weekly charts. When a clear trend is established like this rise since late January, the MA signals are likely to be extremely accurate. Long-term trends can last from 6 months to several years.
Taking a very long-term view, on monthly and quarterly timeframes, the Sensex has formed a triangle with a rising base after March 1992. There is resistance around 4600-plus where three market peaks have occurred. Volumes have risen significantly in the last 18 months. Triangles end up being either continuation patterns or they witness sharp breakout on high volumes. The rise in volumes coupled to price rises makes the latter possibility more likely.