Technically Speaking

I got the feeling there was a change of mood in the India market this week. The nasty gap down early in the week gave way to some good volumes and closes near the high.
The near-term technical indictors are still mixed and in the coming sessions we need to keep a close eye both them and the volume to underpin the longer-term view.
The kind of sentiment swings we have seen over the past few weeks are typical of a market close to a turning point after a sharp sell-off , and the kind of price action we have been seeing is indicative of some fairly wild changes of market mood. The media has likewise been quite schizophrenic – doom and gloom one day, bullish and positive the next.

Longer term this market is searching for its low with a lot of bad news discounted. It is likely not too far away in technical terms and may indeed already be here.
Click it to see a large version of the chart above.
The first thing to note is the very good support and resistance the 200-day moving average is. This will be a key level during a SENSEX recovery although it is a long way off yet.
Next note the 12,500 line. This is around the high the market reached just before the 2006 sharp sell-off and the low the market bounced off during another quite steep correction in 2007. I’ve marked both these areas.
As you can see this level has again lent the market support and the SENSEX bounced off it very nicely this week.
The Fibonacci levels you can see are the 38.2 pct 50 pct and 61.8 pct and are retracement levels of the entire SENSEX upmove from 2001-2008.
As you can see we are close to the 50 pct retracement of this move which stands at 11,900. There is very good long-term technical support for this market at and between 11,900 and 12,500 as marked. This could well be the trough investors have been looking for.