We were flummoxed yet again by the sensex. On the day when we expected it to launch in to a significant correction, it continued to rise higher and registered a gain of 67.03 points. The negative breadth in the A group however raises doubts regarding the strength in this rally. Volumes continued to be upbeat.

We have reached a point where it seems prudent to put the E-wave counts and other logical reasons in the background and just flow with the trend till we get a reversal signal. The indicators in the daily chart continue to be upbeat though they are in the over bought zone. We have got two closes above the long-term trend line as well. The next targets for this rally are 4812 and then 4956.

The reversal signal that we should be looking out for are,

• A close below 4640. That would be a short-term trend reversal signal as well as a negation of the breakout above the long-term trend line and the 200-day EMA.
• A fall below 4370. That would be a medium term trend reversal as well as closing of the gap between 4477 to 4572.

The short-term trend as well as the medium term trend is now up. But we continue to advice extreme caution with long positions at these levels. It is to be seen how long our markets can sustain this nonchalant attitude to overseas markets.

TODAY’S TRADING DAY

A moderately positive opening will see the sensex facing resistance from the zone between 4800 – 4850. The initial targets are 4797, 4825 and then 4869. A very bullish opening that powers the sensex beyond 4850 will take it to 4956.

Supports for the day exist at 4764, 4695 and then 4651. Stops for long positions for the day can be at 4640. A sharp fall below this level can drag the sensex to 4587 and then 4507.

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