Technically Speaking

SENSEX – Bouncing off the 2006 lows II

The SENSEX is still finding good support at the 2006 post sell-off lows. We could be in the midst of forming a bottoming pattern, possibly a double bottom. It’s vital the supports near the recent lows hold. We are heading into a critical few days/weeks for the SENSEX in technical terms.

Near term technical signals are mixed and you can find a daily update on my website at www.reutersindia.net

On the second longer term chart you can clearly see the support. You can also see on the sub-chart the 10-day close-to-close volatility (see note 1) study is coming off the high very quickly. High volatility coincides with market turning points, note the past price action. Each time there is a peak in volatility the price action turns. Given what is happening now we could be seeing another peak and another turning point.

Now to the correlations the SENSEX has with other markets. The third chart is the SENSEX’s correlation with the Asia MSCI – ex Japan (see note 2) index it is still high as you can see. I’m using the MSCI as proxy but the picture is similar if you use the U.S. S&P 500 or even the Dow Jones vs the SENSEX.