Its deuce at this moment as per the weekly time frame and both the bulls as well as bears have to make more efforts to tilt the balance decisively in their favour

S&P Nifty close: 5,258.50
Market Trend
 

Short Term: Sideways                       Medium Term: Down                        Long Term: Down
 

The bears finally succeeded in pushing the Nifty from the beginning till the end of the week. The Nifty fell 128 points (-2.38%) after failing to sustain above the trendline resistance in black. The volumes were significantly higher than last week implying that either there has been bull liquidation or some speculative selling by the bears. We had been inclined towards booking profits and keeping a tight stop loss below the last week’s low of 5,368 points which helped in saving the day for those who followed it.
 

The sectoral indices which outperformed were CNX FMCG (+1.12%) and CNX Pharma (+0.85%) while the underperformers were CNX Metal (-7.45%), CNX Realty (-5.95%), CNX Commodities (-4.25%), CNX Infra (-3.70%), CNX PSU Bank (-3.24%) and CNX PSE (-3.20%). The histogram MACD has moved lower but remains above the median level indicating that the bulls are in control.

Here are some key levels to watch out for this week

• As long as the S&P Nifty stays below 5,299 points (pivot) the bears continue to be in control.

• Support levels in declines are pegged at 5,198 and 5,138 points.

• Resistance levels on the upside are pegged at 5,359 and 5,459 points.

Some Observations

1. The Nifty has completed the 50% retracement levels of the recent rise from 5,032-5,448 points which was pegged at 5,240 points.
2. The ‘gap’ area between 5,246 and 5,260 has to be defended by the bulls (we are already into it) at all cost or else they would find the going tough.
3. The Nifty moved briefly above the resistance line (in black) but it pulled back to close decisively below it.
4. We are witnessing a big triangular movement in the Nifty on the weekly charts implying that unless and until we break-out on either side, the dullness will continue with sudden spurts of activity in between.
5. The volatility expanded as expected last week and a swift move also materialized considering the last few weeks movement.
6. We can see from the weekly chart above that the bulls have to defend the trendline in blue (pegged around 5,264) points at any cost otherwise they lose control.

Strategy

One thing is clear from the last week’s downfall that the bears have lost some of the edge they were holding for the last month or so. The “gap area” on the weekly charts has been closed but it is still open on the dailies. The 5,191 points which is the 61.8% retracement level of the recent rise from 5,032-5,448 points is now the significant support to watch out for. Our inclination towards bearishness since the last couple of weeks has proved to be right but one hopes that some more volatility comes back into the market. The bears succeeded in stopping the bulls’ onslaught last week. Its deuce at this moment as per the weekly time frame and both the bulls as well as bears have to make more efforts to tilt the balance decisively in their favour. The US Fed is doing its bit of talking up the markets (as it has been doing since 2009) by promising another stimulus but one wonders whether it might be too late or the stimulus may fall short of the market expectations. If either of this happens in the coming months then start praying for the bulls. Till then the bulls have their crutches.

(Vidur Pendharkar works as a consultant technical analyst & chief strategist at www.trend4casting.com.)