The market showed signs of stabilising and consolidating inside a narrow range in the new Samvat. Post-Diwali trading was not really enthusiastic but the undertone appeared optimistic. However prices could not sustain higher levels due to profit-taking from nervous operators.
In a week that was truncated by holidays, the BSE Sensex closed at 4629.61 which was a token recovery of 0.67 per cent. The Nifty rose to 1373.55 points a gain of 0.66 per cent. The BSE 200 and the Dollex rose 0.83 per cent and 0.84 per cent respectively.
Broader indicators also indicated a healthy but cautious trend. The ratio of advances to declines was positive with 851 stocks rising while 767 stocks declined. The BSE 500 rose by 1.12 per cent outperforming the big-stock indices to suggest that the bulk of the market was doing better than the pivotals. Trading volumes were low in a week full of holidays and a short Diwali session.
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The week saw pivotals see-sawing around the September 1994 top of 4643 points. There is a fierce tussle between bulls and bears occurring at this level with support in a band around 4600 points. On the top, resistance and selling pressure above 4715 looks powerful.
The long-term trend must be considered up. The short-term trend appears to be sideways. The intermediate trend is either down or sideways. As usual, the intermediate timeframe is the toughest to read. It definitely turned down on October 11 and until last fortnight, it has performed a classic pattern of lower tops and bottoms. After hitting a bottom at 4209 points on November 1, it appears to have started consolidating at higher levels.
Until there is a breakout from the current zone on higher than average volumes, the intermediate trend will be tough to read. On general principles, since it is a reaction against a strong primary bullish long-term trend, it should not last very long. Fibonacci timezone analysis suggests that it will change direction by November 23. It may already have altered from a clear downtrend into a sideways move if this week's trading pattern is maintained.
Applying retracement analysis to the time series from the bottom at 2741 in November 1998, leads to interesting conclusions. The top was at 5150 on October 11, 1999. Thus far, the retracements and supports have come along at roughly 6.2 per cent (5000 points), 12.5 per cent (4850), 25 (4550) per cent and 33 per cent (4350) levels. The next retracement level would be at 50 per cent which is around 3950 points. In between, there is a strong support around 4135 points.
The market is currently moving between the retracement levels at 4550 and 4850 or rather in an even narrower range. A breakout would be considered valid if the market either brea