Technically Speaking
South Asia Technical Analysis with Phil Smith
The SENSEX, searching for the low
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A very nice key day reversal pattern on Wednesday completed on Friday. So far it is a textbook classic with Wednesday’s higher high and lower low but close near the high and Thursday’s lower high and higher low with a close near the low.
With this key day reversal you can see the MACD fast line, the green one, has the makings of an upturn. Short-term indicators are still bearish with the Parabolic-SAR, MACD and Alpha-Beta trend all pointing to the downside but we must watch for these to change and to call the turn. Despite this possible key day reversal, it’s too early to call a short-term trend change but keep an eye on these indicators for clues in the coming days.
The index is now well below the 38.2 pct Fibonacci retracement of the entire low to high move of the BSE. From a technical point of view this close below is not good news and the next big support level is 11,900. This is the level you keep reading about in the newspapers ‘at around 12,000.’ Lots of people are quoting it without really knowing why it’s important.
I think the thing that worries me most is that people are trying to call the end to this correction to the day or a particular level and that is a dangerous game. Technicals give good signals for turning points within 10-15 pct of the trend change. Sometimes you are lucky and the signals are strong, as with the January downturn. But with fundamentals so bearish at the moment – oil price, inflation, politics, weak world markets, US economic downturn – it would be well to get good technical confirmation of a bottoming out.
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The Wall
Sir
Is this a correction or Indian market are under the grip of Bears or one can say we are in bearish phase.If we are in bear market it should last for longer period.Can you explain that bear market in his move forward look for lower bottom or bottom can be formed well before the end of bear market.
true,Market wants some reasons to fall. it has enough negative reasons to fall further. Previously it was metals turn and now it is a combination of so many factors , crude,inflation,economic downturn,unstable govt.. so reasons are plenty… only the last reason for further fall is slowing down of company’s first quarter profits….
looks like 13800 which served as major support last yr, from which the parabolic rise to 21200 occured is acting as resistance. holds the key for any rise near term. A failure should set up new lows.
When Dr.Manmohan singh ji become our prime minister in 2004.. then bse index was around 4000. in his tenure it clibed till 21000…means get a sava panch guna bigger..that was a right time for indian investors to leave market.. but they didnt such.. and when now index is around 13000-135000.. then all investors barking on Dr manmohan singh and p chidamabaram…It is life.. and in this life we get chance to earn very rare.. when index was 21000…why investors didnt sell his stocks.. and convert it in liquidity…
and what future now i can see….till 22nd july market will remain in bear phase…and may be come down some more.. but after 22 nd july.. it will run as fast.. as tiger can….
so it is on judgment of a investor..what he should decide.. one who have enough money in his hand.. can enter in this market..after watching true lower level..and one who not invest.. i can say will lost…here is chance to invest in next 10 days….
Well as it said in the above it’s a risky thing to try and call a major turn to the day.
Despite Friday’s decline after the weak output data the technical picture is still short-term bullish for the SENSEX. That said, European and US markets were soft on Friday as well so that will have a spillover on Monday for the Asian markets.
A critical time.. watch the oil price which is key and has rebounded.
Also remember that the correlation between the rupee’s movements and the SENSEX is very close at the moment so also keep a close eye on what happens to the currency.
The SENSEX is currently getting support (in last two week) at the trend line joining the lows of 2005, 2005 and 2006 in the weekly chart. The next support level is 200 weeks exponetial MA (12563)or the 50% retracement level 12000 (from 2904 to 21206). Probably, it may be the support level. In any case, the weekly chart is bearish. Even the daily chart is bearish looking at the fall on 11-JULY from the upper trendline joing the high of 16-MAY, 17-JUN-08. The monthly chart is bearish also where MACD is in a falling mood. All the trends show downward trend only.
However, there is a silver lining if we look at the daily MACD where divergence is developing corresponding to the low of 18-MAR & 1-JUL. The divergences are more clear in other varieties of MACD indicators (like DEMA). But it is not to be confused that the down trend is over. Rather it may be more if we look at the ADX which are rising and above 30.
looking for a panic meltdown near 11500 which will create a lasting bottom the next few days.
I think the two year gap on the monthly trendline is a bit of a stretch but it’s the 12,000 level near enough which is settling on most charts as the target point. With such a big timescale exact points won’t work, much less calling the turn to the day. The bears are out that’s for sure but remember – when everyone, but everyone is bearish…..
agreed the risk reward trade is surely tilting toward the long side, the india vix finally spiked above 45 so the bottom is near.
I THINK SENSEX HAS GOOD SUPPORT AT 12671 AND NIFTY AT 3774 AS LONG AS IT IS TRADING ABOVE THAT BULLS WILL NOT COMAPLAIN MUCH.
it clearly seems now,that a strong bottom formation process is on..may be a bear market rally,,time will tell us about that,but a medium term bottom was hit yesterday,3815 was not violated on the closing basis and 3775 around supported nifty strongly,with positive divergances appeared in weekly,daily and even hourly charts..with the news fiis sold nifty futures worth 2500 cr on tuesday…i am sure we have seen one sifnificant bottom..
bear flag on daily charts suggesting a test of older lows, looking for 12000 still, would be a great buy there