WEEKLY OUTLOOK: 27APR TO 01MAY 2009

FUNDAMENTALLY

The much awaited “stress test methodology” has gone by without any flutter and now the “stress test results” would be published on April 4th. But perhaps that would also pass by like that because the market players seem to have already put the financial sector in the list of unreliable and discreet sector.

Therefore, now the focus would be shifting towards consumer spending, GDP and unemployment in the days ahead. All this data is listed for next week. The article on Yahoo would make a good reading for this purpose.
(Also see the Economic Calendar at the bottom of this page)

TECHNICALLY

Overall, the bulls and the bears are in a tug of war to pull the markets in their favour. Indexes are poised at a crucial juncture and the outlook for next week is unclear. But the rule of thumb demands that we stay with the trend –and the Medium trend is up. Even if you are circumspect about going long, it would be too soon to go for medium term short positions at current levels though the intraday rules are different.

Asian markets have soared in such a way that they could be charting corrective three waves down in the days ahead. But this correction would be a healthier sign if crucial supports are not breached. Japan, China and Hong Kong seem to have started their correction but Indian markets are still not relenting.

Western markets have still to catch up with the Asian markets in terms of percentage gains from March lows. But the DOW is so confused that it looks like forming a rounding top (bearish pattern) unless there is a leg of sharp move up from current levels. The big up move on FTSE100 last Friday was not accompanied by so lucrative volumes, and that is not a healthy sign.

All this above implies that there is still a cautious optimism and very rightly so, because it is just a bear market rally. It may be borne in mind that any big rally would not be taken as a sign of end of a bear market. But the magnitude of correction after this rally would determine if we are out of the woods or not. A standard correction of maximum 50% would be a healthier sign.


U.S DOW (8076)
Short term caution; Medium term positive.

Here also the trading volume was not encouraging over the last three sessions. Momentum indicators and oscillators are giving mixed signals. Like all other markets this market is also gyrating on the strength of triggers only but no signs of value buying or participation of smart money.

Resistances at 8191 and 8400 are of low to medium strength. But the resistance at 8524 is of formidable nature which requires being shattered to achieve the targets of 9000 to 9100.
Supports for the week are 8000 and 7920. No short term long positions be initiated below 8000. Medium term support remains at 7800 though the picture turns overtly negative only on a close below 7500.


US. S&P500 (866)
Short term positive but caution required; Medium term positive

This index has been lending lot of moral support to the U.S. markets during this uptrend. Its trading volume is comparatively better and the momentum indicators are also not in a mood to give in. But oscillators have started to crossover which is a negative. So, here we have slightly better position but with mixed signals.

The crucial resistance for this index is poised at 900. A close above here would be very positive (signal to the DOW also) and then it would be headed towards 970.
Support at 840 is crucial in the short term. Short term traders may desist from initiating fresh longs below this level. Medium term stop loss mark is 795. But things turn murky below 740 only.


U.K. FTSE100 (4156)
Short & Medium term: Not Clear

As said earlier that this index made big gains on Friday but without any fireworks on the volume side. Rather the volume has been tepid since its rise from March lows. It implies that the market players are not taking its rise seriously so far. However, the Friday close at its highest point of the day makes a point of attraction for this market in near term.

Immediate resistance at 4212 is a major impediment which needs to be surpassed. A close above here would be very positive and then this index would be headed towards 4475 in the medium term. Another resistance of medium strength is 4334 on the way.
Supports are at 4049, 4016 and 3982. No fresh short-term longs below the first support. But the medium-term uptrend loses momentum only on a close below 3895.


INDIA SENSEX (11329)
Short term is sideways with positive bias ; Medium term positive.

It gave a close above its 200DMA after about 11 months. RSI on daily chart is re-entering overbought zone and weekly one is also looking forward to do that. But some oscillators are signaling caution ahead. Another possible signal of bulls losing steam is that the rise on Friday happened with lower trading volume. Still the guns seem to be loaded in favour of the bulls as medium term is very positive. Short term requires cautious optimism. High volatility and selling pressure at higher levels is expected next week in view of the F&O expiry.
This index respected its support at 10650 and now intending to move towards its medium term target of 12500. But the speed with which this has been happening demands vigil at current to higher levels.

Resistance for the week is at 11367 and then 11600 to 11800 aband. Inability to surpass this band would be a signal to brace for a correction.

Immediate supports are at 11115, 10960 and then 10650. Short term traders desist from initiating fresh longs below 10650. Crucial medium term support is at 10098. But the uptrend loses momentum only on a fall below 9700.


INDIA NIFTY (3481)
Short Term is sideways with positive bias; Medium Term positive.

It being main derivative index, there could be bouts of high volatility next week in view of F&O expiry on Thursday. High PCR (put call ratio) implies that there are a lot of short positions in the market. These short positions are helpful in arresting sharp declines as shorts are covered. In other words, even though the markets look overheated these short positions would help hold the markets above crucial support levels in the event of decline.

Resistance levels for this index are 3511, 3550 and then 3635. A move above 3680 would be required to target 3900 levels. But remain vigilant as short term correction can ensue anytime from below 3550-3635 zone.
Support at 3416 and 3371 would be crucial in immediate term. No Short Term buying below 3371. But the Medium term traders can buy up to 3250 with stop loss at 3235. The uptrend loses momentum on a close below 3170.


HONG KONG HANGSENG (15259)
Short term sideways with negative bias; Medium term positive

This index breached all our given supports of last week. It has caused some weakness in the short term as the momentum indicators and oscillators are pointing down again. Weekly RSI is also showing negative divergence. This index could also be charting its three wave down correction just like its Asian compatriots here. For medium term trader this is not a negative sign unless the magnitude of correction is high.

Resistances are at 15404, 15539 and 15977. A move above 15539 would be positive but there could also be reversal down from this level. Target above this resistance would be 16124 and above.
Support at 15035 is immediate term support. A close below here could drag to 14695. Crucial medium term support would be at 14200 which needs to hold to keep the uptrend intact.


CHINA SHANGHAI COMPOSITE (2449)
Short Term sideways with negative bias; Medium Term positive

This index seems to have completed its five wave up move and now could be charting a three wave correction to the up move from its October low at 1665. If it is so then the magnitude of correction would have to be seen in terms of price and time.
Daily momentum indicators are signaling impending weakness in the short term. Weekly ones are also diverging negatively. In the given scenario it would be prudent ot avoid long positions for short to medium term.

Immediate resistance is at 2501, 2520 and then 2580. A move above 2580 is needed to target 2725 and 2950. It would do to remain on the sidelines until above 2580 or wait for a decline to buy at short to medium term supports.
Supports for short term are at 2370 and 2300. Medium term support at 2244 would be crucial to maintain the uptrend.


JAPAN NIKKEI225 (8708)
Short term sideways with negative bias ; Medium term positive but be vigilant.

This index is moving sideways with negative bias over the last few days. Momentum indicators are pointing down. Noticeable thing is that its volume average has been rising irrespective of decline or rise in the market. This development demands caution as it could be in for some big move on either side in short to long term. Otherwise there is no sign of any significant weakness in the medium term.

Resistances are at 8912, 8942 and 8972. Failure to move above 8912 soon could pull this index down once again. To maintain the uptrend it needs to move past 9070. Avoid fresh longs until above this resistance.
Support at 8600 is crucial in the near term. A fall below here signals more weakness in the offing. Next support would be at 8462. Medium term loses momentum only on a close below 8285.

WEEKLY OUTLOOK: 20APR TO 24APR 2009

(Markets from East to West)

JAPAN NIKKEI225 (8908)

This index moved sideways but found support at our given mark 8694. This sideways move could be a halt before another leg up towards the target 9800.

This market is also a buy on declines. Supports are at 8693, 8577 and 8460. Short term traders may not initiate fresh longs on a close below 8577. However, the medium term turns negative only on a close below 8300.

CHINA SHANGHAI (2504)

Defying the negative divergence of its momentum indicators, this index has been moving up slowly and steadily. Finally it has moved convincingly above our given resistance band 2460-2475 and made intraweek peak at 2549. Reaching up to this mark has technical significance as it has recovered more than 38.2% of its down move from May 2008 peak at 3786. This could also be construed as having formed its bottom for the current year.

Now the next mark to be watched is at 2725. A move above this level would be yet another confirmation of its bottom formation. However, it would be too soon to declare it as a resumption of bull market because there are much higher levels to be surpassed before that.

Outlook for the week ahead is sideways to neutral.

Resistances are at 2549 and 2726. A close above 2726 would target 2975.

Needless to say, this market is also a buy on declines. Supports for the week are at 2466, 2440 and 2414. Short term traders may avoid fresh longs below 2440. The uptrend loses momentum only on a move below 2300.

HONGKONG HANGSENG (15601)

This index moved robustly past our given resistance zone 15764-15781, but failed to close above here. The daily charts are suggesting reversal pattern, implying that there is lesser confidence in its moving higher for the moment. But the momentum indicators are not pointing towards any cooling off immediately. Therefore, the best scenario next week would be a sideways trend with lesser conviction to move higher soon.

The only resistance visible is at 15977. Once past here then it would be headed towards its 200dma at 16480. It would also be advisable to remain vigilant at current levels because the first leg of the uptrend from March lows could be nearing its end anytime soon.

Supports would be at 15327, 15126 and 14925. Desist from initiating fresh longs for the short term, if below 15126.

INDIA SENSEX (11023)

Intraday deep corrections were grabbed by the bulls as if some life time opportunity to get into the markets. But a reversal pattern on Thursday and late hour profit booking on Friday signals to observe constraint. Although there are no negative signals from the momentum indicators and oscillators, the rise from March lows could be concluding its one leg up at the current levels.

The envisaged scenario is a movement between a range of 9500 and 11700 over the next four weeks before it takes its future course. But odds are in favor of the bulls and the projected target of this corrective uptrend is 12500. This viewpoint is negated only on a close below 9500.

Outlook for the week ahead is unclear. Resistances are at 11171, 11367. Move above the second resistance would be very positive and could take up to 11640 or 11820. But remain very vigilant if starts moving up from current levels immediately.

There are multiple supports up to the level of 9500. It is also a buy on declines market. Supports at 10900 and 10770 could be utilized to initiate fresh long positions. Stop loss for long positions would be the support at 10660. Support below here would be at 10225.

INDIA NIFTY (3384)

Its 50dma and 100dma have converged and the index has given a close above its 200dma. These are very positive signs. Its huge derivative participation could have helped it to achieve these benchmarks but the SENSEX has yet to move above its 200dma. In other words, the mixed signals point towards constraint at current levels.

The envisaged scenario here would also be a movement between the levels of 3100 and 3700 over the next four weeks. Needless to say, the odds are in favor of the bulls and the projected target for this uptrend is 3900 to 4050 over the medium term. At the same time it should also be borne in mind that this could also be the highest target in this calendar year because there is no confirmation of the end of the prevailing bear market and the Indian markets also could be charting a bear market rally. Favored view is that we are still charting a bear market rally (corrective ‘B’ wave as per the Elliot wave theory).

Resistances are at 3511, 3550 and then at 3680.

Supports are at 3300, 3237 and 3172. Very short term traders may desist from initiating fresh longs below 3300. Medium term traders can buy up to the levels of 3237 with stop at 3170.

U.K. FTSE100 (4092)

The move above our given resistance band 4070-4085 is positive but closing only just above this zone is not a very convincing breakout. The current level is its 100dma (100 days moving average) area and this index has made two unsuccessful attempts earlier also in Jan and Feb to move convincingly past this dma. So, the short term traders need to be vigilant in this zone.

The outlook for the week ahead is not clear. A sideways move within a narrow range could be expected. There are not many negative signals to pull it down soon.

If it manages to move past the current level with strength then hope for the test of its 200dma around 4500 in the days ahead. Resistances on the way would be 4138 and 4212.

Supports are at 4023, 3995 and 3966. Short term traders may desist from initiating fresh longs below its first support. Yet, the uptrend would lose momentum only on a close below 3966.

U.S. DOW (8131)

It made an intraweek peak at 8191 but trended lower to close below our given crucial resistance at 8152 on Friday. Indecision prevails with confidence waning, somewhat. Perhaps, the markets could still be figuring out those -“better than expected?”- results declared by the financial companies last week! Besides that, the Economic data still weighs heavy on the minds of the market players.

Outlook is not clear for the week ahead. A sideways move that does not breach 7800 would not be a negative. But the prevailing momentum could get neutralized below 7800. Watch out!

Resistances for the week are at 8191 and then 8524. Closing above the first resistance would be a very positive signal and the target of 9000 would come into the reckoning.

There are multiple supports up to 7800 and short term buying could be considered at 8068, 7992 with stop at 7800. Medium term is positive as long as above 7530.

WEEKLY OUTLOOK: 13APR TO 17APR 2009

(Please click on chart to enlarge)

All charts' source: Quote.com

U.S. DOW (8083)

This index has been closing above its 50dma for the last three weeks but failed to close past our given resistance at 8088. After hitting this resistance it is now halting just below that. The momentum looks strong enough to surpass this hurdle soon.

VIX (CBOE Volatility Index) has moved down to 36 levels but the earnings season can cause intraday high volatility. Momentum Indicators are not portraying a clear picture. But it seems that most of the bad news has been factored into the markets already because only the positive news of even lesser significance is causing bears to take shelter.

Resistances for the week are at 8088, 8132 and 8524. Failure to move above 8132 has the potential to pull it down once again. But a close above this level would target 9000 in the short term.

Supports are at 7762, 7685 and 7470. Short term bulls may exit below 7685. Medium term support below 7470 would be at 7278 which has to hold so as to maintain the uptrend.
*******

U.K. FTSE (3984)

This index was not able to give a close above 4070 though it made attempts over the last two weeks to do so. Its 50dma also lies in this zone. So, if it gives a close above 4070-4085 zone then it could be headed towards 4300 to 4600 levels.

Momentum Indicators are pointing positively. The other solace is in the fact that its down trend last week was accompanied by low trading volume. But it now needs to surge past with large volume to display some strength. Otherwise, this is the weakest market among the lot here.

Resistances for the week ahead are at 4000, 4070-4085 zone. A close above this zone would target 4212 and then 4334.

Supports would be at 3930, 3879 and 3799. Short term traders may avoid fresh longs below 3799.

Though seems unlikely so soon, if it breaches 3719 on the downside, would imply more pain in the offing for this index.
*******

INDIA NIFTY (3342)

This index is the darling of derivative traders. The trading volume has increased manifold suddenly as market players start gathering courage. But the things are happening too fast here and that demands caution now. A correction looks imminent as it formed a doji on its daily charts. Also that the RSI is in overbought zone and there is negative divergence in ROC.

Resistance zone is 3440-3451. If manages to close above here then the next target would be 3734. Even the target of 3900 would also come into the reckoning, if above 3451.

Supports would be at 3233, 3181 and 3129. Short term traders may avoid initiating fresh longs below 3181. But the medium term turns overtly negative only on a close below 2850.
*******

INDIA SENSEX (10804)

There was no let up in the gusto though the momentum indicators are now signaling that its time to cool down a bit. Overall, this market is strongest among the lot here in the current situation. But it reversed from 10929 –tad above our given resistance 10924 of last week. It implies that it might enter into a short term correction mode anytime soon.

(We have Infosys results coming on Wednesday, which would determine the course for the week ahead. Currently at 1426, Infosys is experiencing stiff resistance from 1450 level).

Resistance for SENSEX is at 10929-10954 band. A move above this band would target 11375 and then 11639.

Supports are at 10391, 10225 and 10060. Short term traders may avoid fresh long positions below 10225. Medium term turns negative only on a close below 9488.
*******

HONGKONG HANGSENG (14901)

Here also the momentum indicators are giving mixed signals.

Resistances are at 15147, 15525 and then 15764-15781 band. A move above this band would make attempts towards its 200dma at 16480.

Supports would be at 14484, 14279 and 14076. Avoid fresh longs below 14279.
*******

CHINA SHANGHAI (2444)

In an effort to somehow move above 2460, this index seems to have started losing momentum. The zone from 2460 to 2475 is proving to be formidable resistance as it got repulsed from 2457. Yet, this is its short term outlook only and the medium term is still very positive.

Resistance zone is 2460-2475. A move above here would bring the targets of 2726 and 2976 into the reckoning.

Supports would be at 2297, 2240 and 2197. Short term traders may desist from initiating fresh longs below 2240. However, the things turn overtly negative only on a close below 2037.

*******

JAPAN NIKKEI (8964)

Profit booking on Friday accompanied by good volume could be a cause of concern in the near term. But the technical outlook has not turned negative for this index in short to medium term yet. However, we should always be prepared for short term corrections during such gusto in the markets.

Resistances are at 9069, 9325 and 9520. Area of 9500-9600 is a formidable resistance zone. If it manages to close above this zone then the next target of 10000 would come into the reckoning.

Supports are at 8694, 8578 and 8463. Short term traders may not initiate fresh longs below 8578. But this index turns negative only below its medium term support at 8088.

*******

WEEKLY OUTLOOK: 06APR TO 10APR 2009

The markets didn't react very negatively to continuously rising unemployment data last Friday but it is certainly going to remain in the minds of the bulls. The rising concern of unemployment could subdue the mood to some extent next week, but the bulls are not going to relent so soon now.

Technically, almost all the indices are charting their fifth wave(final wave) of this recent uptrend. This fifth wave can either get extended if the nearest resistances are breached, otherwise a sideways trend could continue from the current levels for a few more days.

Momentum indicators on weekly charts of many markets have entered into the positive zone after a very prolonged period. Volatility indexes are showing signs of exhaustion and cooling off. All of these are very positive signs for the markets in short to medium term.
Please also see the detailed outlook on CBOE Volatility Index(VIX) in the post of Saturday, below.

RESISTANCE AND SUPPORT LEVELS
(East to West)
(Only the crucial support and resistances are given for this week. Any significant view point, if arises would be given in the updates.)

JAPAN NIKKEI (8750)
Resistances are at 9008, 9325(short term longs book profits here), 9521 and 9630
Supports are at 8485, 8390 and then 7950-7800 strong support zone.

CHINA SHANGHAI(2420)
Resistances are at 2475, 2523(Book short term profit here) and 2726.
Supports at 2293 and 2200-2240 band is strong support zone.

HONGKONG HANGSENG (14546)
Resistances are at 15525 and then at 15764-15780 zone.
Supports are at 14029 and then 13000-13100 band is a strong support zone.

INDIA SENSEX (10349)
Resistances are at 10470, 10571 and then 10924.
Supports are at 9977, 9834 and 9650.

INDIA NIFTY (3211)
Resistances are at 3229-3241 zone; but a move above 3287 can take to 3450 also.
Supports are at 3095, 2999 and 2884.

U.K. FTSE100 (4030)
Resistances are at 4138, 4185 and 4211. Book partial profits at 4185.
Support around 3950 should prove to be a strong support. Stop loss for long positions is 3800.

U.S. DOW (8018)
Resistances remain at 8088, 8132 and 8406.
Supports are at 7757, 7682, and 7560-7438 zone. Stop loss for long positions is 7270.

SATURDAY 04APR 2009

(Please click on chart to enlarge)

VIX IN FOCUS

CBOE Volatility Index (VIX) currently at 39.70, has come into focus of the traders. Volatility cooling down is a very good sign for the markets. The pattern in the chart suggests that this index has almost breached its triangular pattern which is a very positive sign. If there is a move further down, say a close below 39 (and more so below 36) would keep the U.S. markets in high spirits. It is also a bellwether index for the world markets. Most of the technical traders world over watch it closely.

Analysts are of varying views about its levels. Some suggest that its moving below 35 would suggest a return to primary uptrend. But that would be too optimistic. The favoured view would be a touch of 20 to confirm the market bottom for 2009.

The breakout gives a down target of 20 over the next 3-6 months. But it may not be taken seriously because given the outlook for the equity markets over the next few months it would be difficult for this index to touch that level. Yet, we should take solace in the fact that its trading around 30 to 40 levels also would be very positive for the bulls.

Whatsoever, this index raises hopes in near to short term, at least suggesting that the markets are a buy on decline with adequate stop losses.
Medium term investing can be considered in the U.S. markets on its decline below 39 to 36 mark.