The Reserve Bank of
India left interest rates unchanged, but assured roll back of recent liquidity
tightening measures when stability returns to the currency market, enabling it
to resume, supporting growth. To take benefit of rupee depreciation and to
boost exports which had reported contraction in May and June, the government
raised interest subvention to 3% from 2% in engineering and textile. FED
Chairman Ben S. Bernanke admitted that economic growth was modest and would
continue bond purchases which has improved the rupee against dollar, however
the suspension of trading in all agriculture related contracts and deferment of
settlement by NSEL (National Spot Exchange Ltd), a subsidiary of Financial
Technologies, sparked fears of cash crunch, which resulted in heavy sell off in
equity market with rupee moving back above 61 levels. BSE Sensex tumbled 584
points w-o-w to settle at 19164 levels, while NSE Nifty lost over 200 points to
settle at 5678 levels. FIIs were net buyer to the extent of Rs 2.7 bn, while
DIIs sold to the tune of Rs 12.2 bn. Globally, Economic confidence in the euro
area improved for the third month in July, reaching the highest in 15 months
and adding to indications that the 17-nation currency bloc is emerging from a
record-long recession. The US consumer confidence for the month of July stood
at 80.3 vs a prior month figure of 82.1.
Sensex opened the week
at 19714, made a high of 19751, low of 19078 and closed the week at 19164. Thus
it registered a strong weekly loss of 584 points. At the same time the Nifty
opened the week at 5869, made a high of 5886, low of 5649 and closed the week
at 5677. Thus the Nifty went down by 209 points on a weekly basis. On the daily
charts, both the indices have formed black body candles every day of the week
except for Wednesday. Friday was no different as again both the indices formed
a big black body candle. This formation came on the back of Three Black Crows
formation which was completed a week before. This formation is a Bearish Reversal
pattern which can translate into a trend reversal in higher timeframe which is currently
being observed in the market. On the weekly charts, both Sensex and Nifty again
formed a big black body candle. Thus both daily as well as weekly charts
suggest bearishness to continue in the near term.
Both the indices fell
after making a lower top at Sensex 20351 and Nifty 6093. In the process both
the indices have filled the gap between Sensex 19785-19723 and Nifty 5889-5879
and the Nifty also filled the second gap between 5749-5699 and in the process
not only breached critical support level but also turned the Short term as well
as the Medium term trend down.
Two weeks back Nifty
gave a Rising Wedge bearish breakout and the target as per this breakout fell at
Nifty 5715 which has been achieved this week.
Generally this occurs in an uptrend but here it has occurred in the
middle of a downtrend and is acting as a bearish continuation pattern, so there
is a possibility of it touching Nifty 5566, the point from where the rally started.
This week both the
indices have closed below the medium term average of 50dma (Sensex – 19494 and
Nifty – 5867) and is already below the short term average of 20dma (Sensex –
19733 and Nifty – 5904) and the long term average of 200dma (Sensex – 19335 and
Nifty – 5854). Thus the trend in the short term, medium term and long term timeframe
is bearish.
MACD and ROC both are
negative and continue with their Sell signal. RSI continues in Sell mode suggesting
bearish momentum to continue. Stochastic Oscillator has signaled a Buy in
oversold condition as %K (11) has gone above %D. MFI has gone below the
equilibrium line which suggests money flowing out of the market. ADX has gone
up slightly but is still below 20 suggesting that the current trend has no
strength. OBV has gone below previous bottom and it continues in its Sell mode.
Thus majority of the Oscillators
points towards bearishness to continue in the near term.
The Nifty O.I. PCR has reduced
and is now at 1.03. For the current month series, highest Open interest build up
is seen at 5600 Put and 6000 Call. This suggests that the market expects a trading
range of 5600 and 6000 levels. Friday saw high amount of Call writing at 5900
strike which suggests strong resistance at that level.
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