Wild Swings Ahead

THE market started the week with a very strong rally on Monday, but lost steam to end with a greatly reduced gain of 1.34%, or 225.49 points. The Nifty finished 1.50% up, and the CNX Midcap Index gained 1.83%. Mahindra & Mahindra was the biggest winner among the index stocks with a 7.0% gain. The other index stocks to go up included Tata Motors, HDFC Bank, DLF and Reliance Infrastructure with gains between 7% and 4.7%. 

    Cipla was the biggest loser among the index stocks with a 8.4% fall. The other index stocks to go down included Bharti Airtel, Reliance Communications, Sterlite Industries and Tata Steel with losses falling between 8.1% and 1.8%. 
    Bajaj FinServ was the biggest winner among the more heavily traded non-index stocks with a 35% gain. The other nonindex stocks to go up included Aqua Logistics, Mundra Port, Axis Bank, LIC Housing Finance, Rural Electrification, Talwalkars Better Value Fitness and Dr Reddy's Laboratories with gains between 13.4% and 7%. 
    Aban Offshore was the biggest loser among the more heavily traded nonindex stocks with a 17.7% loss. The other non-index stocks to go down included Engineers India, Kemrock Industries, Idea Cellular, Reliance Natural Resources, Piramal Healthcare, GMR Infrastructure and Jubilant FoodWorks with losses falling between 15.4% and 5.6%. 
INTERMEDIATE TREND: The market's intermediate trend is still down, but could turn up if there is a decent rally early this week. However, the odds would recede if the decline persists, and the indices go below their recent lows (16,684 for the Sensex). The Sensex would need to go above 17,400 for an intermediate uptrend. The corresponding figure is 5,225 for the nifty and 7,975 for the CNX Midcap index. (Figures rounded up to the nearest 25). 
LONG-TERM TREND:Our market's longterm trend is up, as the indices made new bull market highs during the preceding intermediate uptrend. However, about 15% of the more heavily traded stocks are in major downtrends, and more are entering one during this decline. 
    The Sensex would enter a bear market if it falls below 15,300, the Nifty under 4,500, and the CNX Midcap below 6,350. Most global markets are also in major uptrends at this time. The lower of the past two intermediate bottoms for the indices has been taken as the bear market trigger, as they are very close to each other. 
    TRADING & INVESTING STRATEGIES: Increasing portfolio exposure should be avoided for now, as the bull market has run for over two years, making this a little too late to get in. If cash must be invested, wait for this intermediate downtrend to end. It would be a good move to keep portfolios defensive by switching out of highly volatile sectors such as sugar, real estate, construction, airlines, financial services and even metals, even though some of these stocks had done well in the past rally. 
GLOBAL PERSPECTIVE: 
Most major global markets are still in intermediate downtrends despite strong rallies at the beginning of the week. Some had come close to entering an uptrend, and the German DAX appeared to be in one already. The Dow will have to now cross 11,000 to enter an uptrend. 
    Many of the global indices made fresh bull market highs during the last intermediate uptrend, so there is no reason yet to suspect that the global bull market was ending. However, the situation will change if they go below the lows reached during this downtrend. A few indices including the Shanghai Composite and French CAC-40 had gone below their last intermediate bottoms, which is a bear market signal. The Dow would go into a bear market if it closes below 9,750. 
    The Sensex had gained 45.4% in the twelve months that ended on Thursday, up one position to the 5th place among 35 well-known global indices considered for the study. Sri Lanka continues to head the list with a 125.1% gain. Turkey, Indonesia, Argentina and Sensex follow. The Dow Jones Industrial Average has gained 29.4% and the NASDAQ Composite gained 41.7% over the same period. (These rankings do not take exchange rate effects into consideration).www.trendwatchindia.com