Two-way Street
 

The stock market reversed downwards at the start of the week, but recouped part of its losses towards the end. The Sensex finished the week 1.11% or 205.19 points lower, and the Nifty ended 1.05% down. The CNX Midcap Index lost a substantially larger 2.01%.

Larsen & Toubro was the biggest winner among index stocks with an 8.1% gain. The other index stocks to rise included TCS, Cipla, HDFC Bank and BHEL with gains between 4.3% and 2.1%.

State Bank was the biggest loser among index stocks with a 12.3% loss. The other index stocks to go down included ONGC, Reliance Communications, Reliance Infrastructure and Jaiprakash Associates with losses falling between 10.1% and 6.5%.

Mundra Port was the biggest winner among the more heavily traded non-index stocks with a 7.1% gain. The other non-index stocks to go up included Shriram Transport Finance, Glenmark Pharmaceuticals, Asian Paints, IDFC, Bank of India, Titan Industries and Ashok Leyland with gains between 6.5% and 3.3%.

Kwality Dairy India was the biggest loser among the more heavily traded non-index stocks with a 27.1% loss. The other non-index stocks to go down included Paramount Printpackaging, ARSS Infrastructure Projects, Punj Lloyd, Jain Irrigation, Orchid Chemicals, DCB and HOEC with losses falling between 24.1% and 8.3%.

INTERMEDIATE TREND

The Sensex and Nifty had briefly crossed their intermediate uptrend trigger levels about a week ago, suggesting that the intermediate trend may be turning up. However, that signal has been rendered false by the decline that followed.

The Sensex currently needs to go above 18,725 to start an intermediate uptrend. The Nifty''s equivalent is 5,625 and that for the CNX Midcap Index is 8,075. (Figures are rounded up to the nearest 25). These levels will drop down to the peak of the rally that was in progress at the end of the week.

Most global markets are in intermediate downtrends now, with the European and American indices also falling into one last week. Most of these markets had started rallying again at the end of the week, but it is too early to say whether their intermediate downtrends are anywhere near their end.

LONG-TERM TREND

Our long-term (major) trend is still up, which means that the bull market has survived so far despite some fairly persistent declines in the last few weeks. The bull market started on February 11 when the Sensex bottomed at 17,296. The indices have rising intermediate tops and bottoms as required for a bull market.

The last intermediate bottom for the Sensex was at 17,775, and a fall below that could mean that the bull market has aborted. The indices have already fallen below their 200-day moving averages during this intermediate downtrend. There is some threat to the bull market with stocks like Tata Steel and State Bank reversing into major downtrends and falling to multi-month lows.

TRADING & INVESTING STRATEGIES

Existing portfolios should be held on to as we are probably still in a relatively new bull market. Stocks which fell to their lowest in three months or more should be swapped for those which are at least 20% above their 2011 lows. Further investments can be made now, but stocks which fell to their lowest levels in 2011 should be avoided. Quite a few banks belong to that list.

GLOBAL PERSPECTIVE

Almost all the global markets are now in intermediate downtrends. The Dow had started rallying again towards the end of the week, but will have to climb past its last minor top of 12,807 to end its downtrend.

Most global markets are in bull phases, though. Japan and Brazil are among the very few important markets that are in bear phases. The Dow would go into a major downtrend if it were to breach 12,000.

The Sensex gained 9.8% in the twelve months that ended on Thursday, down four positions to the 29th place among 35 wellknown global indices considered for the study.

Sri Lanka continues to head the list with a 76.3% gain. Argentina, Indonesia, South Korea and the NASDAQ Composite follow. The Dow Jones Industrial Average has gained 25.2% and the NASDAQ Composite has gained 28.1% over the same period. (These rankings do not take exchange rate effects into consideration).

 
Deepak Mohoni (The author is an independent technical analyst)
 
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