Range-bound trading likely

MACRO TECHNICALS

 The market could trade roughly in the range of Sensex 5050-5250 and Nifty 1620-1690

 The market jumped on Monday and Tuesday before trading through a tight range on Wednesday and Thursday.

 On Friday, it crashed, probably due to profit-taking. The Sensex hit a high of 5263 points before closing at 5131.72 for an overall gain of 1.72 per cent.

 The Nifty hit a high of 1688 before sliding back to 1645.8 points for a week-on-week gain of 1.89 per cent. Breadth indicators weakened on Friday, with declines outweighing advances. Volumes were excellent throughout.

 The broad BSE500 rose by 2.52 per cent outperforming narrower indices. The put-call ratio for the Nifty ended at around 0.38, which would be reckoned neutral territory. The Defty was up 2.47 per cent as the rupee surged against the dollar.

 Outlook: The most likely pattern of trading for next week is range-bound trading between roughly Sensex 5050-5250 and Nifty 1620-1690.

 That is, one or two more weak sessions followed by a small recovery/consolidation. As such, we are in a short-term term downtrend, while the medium-term and long-term trends remain positive.

 Rationale: The reaction started on Friday and it will probably work itself out when the indices hit support at Nifty 1620/ Sensex 5050 respectively.

 While oscillators like the RSI and ROC have started moving down, they haven't yet hit oversold levels. Neither has the p-c ratio. So, there's a little more downside left.

 But there are also plenty of bullish stocks moving against the overall trend of reaction. That bulllishness should be enough to prevent a serious reaction.

 Counter-view: The market made new highs this week