Friday’s pullback continued with broad selling.
Index gapped in early trading hours of the future markets and kept selling during the regular hours. Breadth was very poor. Volume, however, was not huge.
I think we can safely say that one leg of a rally is now complete
Index could not overcome the elements of weakness that we had been talking about, and made a short term lower low. It however was a very strong run. Now, the question is whether the 160-70-point run was a one-time wonder or a harbinger of better times ahead for the index.
Short-term momentum is oversold, and a bounce may happen very soon. But what we need to pay attention to is if the index can make an emphatic new high, and if not, how far it drops, and if that drop is associated with poor breadth and high volume.
The best thing for the bulls is a sideways action by the index. That way overbought conditions get resolved, bears get whipsawed, and market builds internal strength to advance.
Short term trend appears to have turned down. Mid-term trend is down. And long term trend is down.
I am not going to be aggressively short. I have decided to give the bulls the benefit of my doubt, I may change my mind tomorrow, but, as of now, that’s my stance for the mid-term.
That does not mean that I will not trade the short side of the market if I see an opportunity.
I saw an opportunity early morning
Give me a setup like the above, and I will start planning a short for a trade.
At the close, index rallied to the neighbourhood of 789 pivot. Resistance is at 789, support at 768 and 750.
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