Markets for 07 aug 09

Again the critical index level of 4717 became a formidable resistance and nifty having remained above 4700 for the most part of the day could just touch the level of 4717 once & traders realizing that nse index can not cross the magic level of 4717, suddenly went rampage on a ruthless shorting spree & bulls too liquidated their positions and joined the party with bears & started shorting when the critical intraday support at 4560 was decisively breached. The merciless shorting was so powerful that nifty kept on falling & falling till it reached the lower band of the rectangle around 4560 levels. Although the savage fall during last hour of thursday has sprained the back bone of nifty, only a decisive breach of 4555 will certainly break the backbone of nifty to reach 4475 levels in quick time. However a bounce back from thursday lows can be considered as a normal fall induced by the met department as similar was the case on 29th july induced by reliance results or like the fall on 22 july induced by commodity price melt down.

If one has a look at the hourly chart above, one will notice that nifty after breaching the neck line of the mini h&s formation,took support exactly at the base of the rectangle. The ferocity of downward move clearly suggests that the base of the rectangle around 4555 will be breached & nifty may come down further to find temporary support around 100 ema around 4515 levels, & a breach of 4515 can easily bring down nifty to support around make or break 4477 levels. All these gloomy situation will only occur in case of a weak us & asian markets. However with strong asian markets in the morning ( which seems to be most unlikely), nifty can show a sharp bounce back towards 4628 to 4646 levels to encounter another bout of shorting, but whether the shorting this time will be successful or not is to be seen.

The fall on thursday has weakened most of the daily indicators all of which were earlier enjoying the luxury of upper 80% comfort zone & now have slipped below it. Another day of fall can confirm the weakness that the daily indicators have started to generate on thursday. Last weeks close for nifty was at 4636 and last weeks high was at 4670 after 3 consecutive weekly rise. So, niftys closing below the highs of last week may be nothing uncommon although bears will make their utmost efforts to pull down nifty on every intraday rise on friday to close below last weeks closing levels of 4636 to thwart 4th consecutive weekly gainA