Resume buying only after a major decline: Deepak Mohoni (ET)

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The market reversed upwards on Wednesday, and a couple of good rallies saw the Sensex end the week 1.60% or 247.35 points higher, and the Nifty 1.34% up. However, the CNX Midcap Index lost 1.55%. Tata Motors was the biggest winner among index stocks with a 7.2% gain. Other index stocks to rise included ICICI Bank, HDFC, Mahindra & Mahindra and HDFC Bank with gains between 6.8% and 5.2%. Jaiprakash Associates was the biggest loser among index stocks with a 9.1% loss. Other index stocks to fall included Larsen & Toubro, Jindal Steel & Power, Tata Steel and Hero Motocorp with losses falling between 6.2% and 3.7%. Sun TV Network was the biggest winner among the more heavily traded non-index stocks with a 9.5% gain. Other non-index stocks to go up included Shree Renuka Sugars, Sintex Industries, Lovable Lingerie, Steel Authority of India, Ranbaxy Laboratories, Educomp Solutions and Titan Industries with gains between 9.2% and 6.4%. Allahabad Bank was the biggest loser among the more heavily traded non-index stocks with a 15.7% loss. Other non-index stocks to go down included Rural Electrification, Shriram Transport Finance, Jet Airways, Power Finance, Jain Irrigation, HOEC and Canara Bank with losses falling between 14.8% and 10.9%. INTERMEDIATE TREND Last week's rallies have raised hopes that an intermediate uptrend may be developing, especially as some of the global markets have entered one, and the rest not far from following suit. An uptrend would be confirmed if the Sensex were to cross 16,150, the Nifty 4,850, and the CNX Midcap 6,900. However, these levels could drop to the top of the current rally. An uptrend would end the intermediate downtrend which started with the Sensex's top of 17,004 on December 7. LONG-TERM TREND The market's long-term trend is now best assumed to be down, as the indices once again have falling intermediate tops and bottoms, even though the lows of the last four months have been within 5% of each other. The indices would have to climb past their previous intermediate tops for a bull market (long-term uptrend) signal. This had happened in October, but that signal turned out to be a false one. A bull market would now be signalled if the Sensex closes above 17,050, the Nifty above 5,150 and the CNX Midcap Index above 6,900. (Figures are rounded up to 50). A crossing of the 200-day moving averages by the indices would be additional confirmation. The Sensex's 200-day average stood just below 17,650 at the end of the week. A few global markets may be about to enter bull phases as they had crossed their last intermediate tops, and have subsequently not gone below their intermediate previous bottoms. TRADING & INVESTING STRATEGIES Additional investing for the longer term should now be carried out two weeks into a significant decline, or an intermediate downtrend. Stocks which may have been purchased recently should be held on to, as they would have been bought at fairly low levels, and there is a reasonable chance that the market may have bottomed out, or would not decline substantially more. Investing in gold and other commodities remains risky, as the longer-term trend in most commodities is almost certainly down. All major commodities remain well below the peaks they reached earlier in the year, in dollar terms. Gold has gone below its 200-day moving average, confirming a bear market in the commodity. GLOBAL PERSPECTIVE The global intermediate trend may have turned up, with the Dow and some of the European indices already in one, and the others not far from their uptrend confirmation levels. The Dow had signalled a bull market for itself by going past its last intermediate top as well as its 200-day moving average. Several European indices and Brazil's BOVESPA also followed suit, as also the Sensex and the Nifty. However, the Dow is the only major index to have crossed its 200-day moving average, and the Sensex and Nifty subsequently went below their last intermediate bottoms, invalidating that signal. The Sensex lost 20.9% in the twelve months that ended on Thursday, keeping it at the 27th place among 35 well-known global indices considered for the study. The Dow heads the list with a 5.2% gain. The NASDAQ Composite has lost 2.5% over the same period. (These rankings do not take exchange rate effects into consideration).