We almost made it to our first target of 3100, but the sensex hit 3092 on Wednesday and reversed all the way down to 3032 the next day. But this did not lead to a selloff and the index climbed back up to almost 3060 on Friday. This is the hallmark of a range-bound market — up one day and down another day finally going nowhere over many days.
This pattern invariably follows a big move down or up when the market players look for a direction. Remember how the market meandered for weeks in January after the 600-point rally from late October and then shifted 200 points down.
Then it again slowly meandered up in February until a great budget (Rahul Bajaj had given it 10/10) released the market from stifling boredom or muted expectancy (take your pick) into something more exciting — a 400-point fall in March and April. We are once again in a limbo now, which has meant a sideways action for a month.
As usual we would be released from the boredom and misery soon through a significant move. But, which side' Although I have been bearish, since 3400 is based on fundamentals, I see no definite pattern of continuing bearishness now in prices. This does not mean that I am bullish.
There is little among the sensex heavyweights to be bullish about. Over the course of the next week or two we will be on the threshold of a significant move that will relieve us from our boredom and sideways action.
How do we know which way we are headed' If we do not take out 3100 decisively this week, I am afraid the odds shift towards the downside, especially as soon as we break 3030 with force. In fact, considering that we ended the week lower after two futile attempts to cross 3100 makes this rally somewhat suspect.
On the other hand if we breach 3100 and stay there for a couple of days, a nice fresh rally would emerge lasting over 10days at least. Sometimes, doing nothing is really the best strategy. We are in that sort of time now.
The odds of the market moving in either direction is 50:50 — a perfectly random event, statistically speaking and not worth betting on. A new interesting pattern is how firmly the market is holding up despite fresh selloff in software stocks. Infosys, Wipro, Satyam etc. have started wilting again and the indomitable bulls are putting money into stocks like State Bank of India, Tisco, Telco even Hindustan Lever Limited.
Last week, I had mentioned that ITC may hit a resistance at 730. It touched 725 and then collapsed. Sometimes, you simply get lucky.