Update for 8th August 2011

It's Chaos Out There !

• Finally, major stock market indices have decisively broken out of their eighteen month old upward moving trading channel. Sadly, they have broken downwards. 
• The just broken channel had a height of 650 points approximately.
• Now the question is, will the market revisit the lower boundary of another support line to be drawn some 650 points below the just broken channel.
• As stock markets all over the world have been shaken and started a significant down move simultaneously, such a possibility is not out of the realms as of now.
• As such, next major medium term support for the Nifty is at around the 4700 to 4800 levels. However, readers may please take note that this is not a trade recommendation and is provided as a medium term plausible scenario. Even if the scenario works out  as expected, it might happen only after some time and that too, after some recoveries. It is also possible that, by that time, the support might move upwards merely because of  passage of time.  
• In the meanwhile, the lower boundary of the just broken old trading channel and the forward slanting supply line will act as the resistances against any up moves.
• Even after the continuous fall for the past eight months or so Nifty index is just reaching the long term trailing valuation averages by now. This author was regularly pointing out the fact that the index is retaining premium valuations, in spite of the low growth scenario. ( Please see the regular updates of trailing fundamentals of Nifty index and the long term analysis report thereof. )        

S&P CNX Nifty Index - Weekly Chart 

Nifty Futures Daily Chart       

Update for 5th August 2011

The Tsunami is Here !

Yesterday, it felt like the market is in the process of testing the resistances around candle of two days back. But the test failed at the first gate, ie. at the low of the reference candle. What happened afterwards was beyond anybody's guess. Now, at the time of writing this post, Nifty Future is hanging on to the last known support of 5175 - 5200 area. As the financial markets have entered an era of extreme volatility, technical predictions would be of not much help. Yet, it seems that a break of the support at 5175 - 5200 may lead to a swing even to a low of 4800 levels. However,  it remains to be reiterated that markets never travel in straight lines and even if it reaches the predicted levels, it might be after much back and forth movements.  It is also notable that sharp falls are associated with sharp recoveries, as the increased level of volatility acts both the ways.

Nifty Futures Daily Chart