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Even as the US markets are soaring, Indian indices appear weak
The truncated Christmas trading week turned out to be quite volatile, as price moves caused by profit-booking and strong US data held sway over the indices.
The week ahead is expected to be relatively passive due to year-end holidays, which may result in a lack of global as well as domestic triggers to stock prices. Investors should tread with caution in the coming week.
The rupee too was choppy and stayed below the 63 mark against the dollar. Crude oil extended its weekly fall by tumbling 4 per cent to close at $54.7 a barrel.
The commodity needs to hold above $50 levels to see some relief in the coming weeks. The next level to watch is pegged at ₹38. Even natural gas extended its decline on worries of a supply glut and has plunged 13.3 per cent to close the week at $3 per mmbtu.
Globally, the US indices — the Standard & Poor’s 500, Dow Jones Industrial Average and the Nasdaq Composite —registered new highs on Friday even as most other major markets were shut that day. The S&P 500 and the Dow ended the week at records, posting their biggest rally in the past three years.
Back in domestic markets, the daily relative strength index, which bounced back a week ago is weakening. It is on the brink of re-entering the bearish zone from the neutral region. Volumes in the past week were below par.
The short-term trend continues to be down. Other indicators in the daily charts continue to hover in the negative territory supporting this downtrend. Indicators in the weekly chart have also given a sell signal and the momentum is fading.
The indicators are displaying negative divergence, indicating that the medium-term trend is under threat and that a reversal may be on the cards. However, this trend is likely to take sometime to unfold.
Sensex (27,241.7)
Last week, the Sensex reversed downwards from the intra-week peak of 27,851 and fell 130 points or 0.48 per cent for the week, closing on a marginally negative note.
Last week, the Sensex reversed downwards from the intra-week peak of 27,851 and fell 130 points or 0.48 per cent for the week, closing on a marginally negative note.
The week ahead: The index continues to be in a short-term downtrend. The significant resistances are at 27,700 and 28,000.
A decisive rally and close above 28,000 is needed to alter this bearish short-term view. Inability to surpass 27,700 in the early part of the week will be an indication that selling pressure continues.
The Sensex is testing an immediate support at 27,000, a psychological level as well. A fall below this level can pull the index down to 26,042 or 25,144 in the coming sessions.
Medium-term trend: The movement over the coming weeks will determine that the medium-term correction is continuing or just a short-term corrective decline.
A strong rally above 28,000 will be needed to indicate that the bullish momentum has returned and that the index can regain its highs.
A failure to surpass this levels will mean that the decline from the 28,822-peak can extend downwards to 24,500. The 200-DMA hovering around 25,395 can act as a key base in the event of a sharp fall.
Nifty (8,200.7)
The Nifty too reversed downwards from the intra-week peak of 8,364.7 and declined 24.5 points to end the week on a marginally negative note.
The Nifty too reversed downwards from the intra-week peak of 8,364.7 and declined 24.5 points to end the week on a marginally negative note.
The week ahead: The index has key resistance at 8,324 and 8,400 levels. Inability to rally above the first resistance will indicate selling pressure exists.
On the downside, the index can test a key support at 8,100 levels. A fall below this level can pull it down to 7,961. Further breakthrough of this level will strengthen the downtrend and drag Nifty down to 7,854 and then 7,601 levels.
Medium-term trend: The index is also testing the 8000 support which it managed to hold recently.
Having said that, a fall below this level will signify that the uptrend is under threat. Failure to rally beyond 8400 will keep the near term downtrend alive. A fall to 7,724 or 7,600 is possible in the weeks ahead.
However, an emphatic break of the level, can take the index to a new high.
Global cues
In the shortened week, most global asset markets were closed for festive holidays. The CBOE volatility index continued its decline the previous week to close at 14.5 as investor concerns faded. The Dow surged 248 points to close at 18,053.7 which is a record closing.
In the shortened week, most global asset markets were closed for festive holidays. The CBOE volatility index continued its decline the previous week to close at 14.5 as investor concerns faded. The Dow surged 248 points to close at 18,053.7 which is a record closing.
The index can trend upwards to 18,400 and then to 19,200 in the medium term. Gold and silver ended the week on a flat note.
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