| Week Ahead: Market close to its peak? |
| MACRO TECHNICALS |
| Devangshu Datta / New Delhi October 16, 2006 |
| Weak breadth usually means the uptrend is not quite sustainable. |
| The Sensex soared to a new high in what turned out to be a week of rather puzzling trading patterns. The Sensex closed at 12736 for a gain of 2.94 per cent. The Nifty rose 2.98 per cent closing at 3676, while the Defty rose 3.17 per cent. |
| The driver was IT stocks with the CNXIT rising by an amazing 8.57 per cent this week. Breadth signals did not confirm the new highs. Volumes rose but remained concentrated in the index stocks. |
| Advances were outnumbered by declines. The BSE 500 rose by 2.05 per cent but smaller stocks saw a lot of negative movement. In terms of institutional attitude, the FIs remained positive while the mutual funds were net sellers until Thursday. |
| Outlook: We've seen a breakout in the heavyweight segment and the price move was backed by volumes. The short-term outlook should remain positive and the Nifty has current targets in the 3750 range. However, the weak breadth signals and the time factor suggest that the market must be very close to a peak. |
| Rationale: Strictly by the book, a price rise backed by volume expansion ought to be enough to keep the trend going. But weak breadth usually means the uptrend is not quite sustainable. |
| The intermediate trend has been up for 16 weeks |
