The sensex behaved along expected lines on Monday. It opened at an all time high of 6131, rose to 6151 and then lost ground steadily to end the day at 5924. There seems to be an air of caution and unease in the market now. The general consensus is that a technical correction is overdue.

Let us take a brief look at the awesome rise from the low of 5127.79 (01-02-00). The sensex gained 1023 points in just 11 trading sessions. Yesterday’s fall from the peak of 6151 does not entirely convince one that a full-scale correction has begun. As mentioned yesterday, we would like to see the gap between 5789 and 5985 filled before any correction is taken seriously.

A five-wave formation seems to be complete between 5127.79 and 6151. The broad retracement targets for this move is 5909, 5760, 5588 and then 5518. It is however, too soon to judge the degree of the correction. A correct picture will emerge only at the end of this week.

The sensex had a formidable resistance at the 5650 level. This level could be the first halt once the slide starts in earnest. The intermediate term trend will however, continue to be up as long as the low of 5127.79 is not breached.

The most likely scenario for Tuesday morning is that the fall will resume with more vigor. The downward targets in this case are 5887, 5847 and then 5783. Considerable support can be expected from the 5780 level. If this zone were breached strongly, the next target would be 5658. Stop loss level for short positions for inter day trades can be at 6070.

In case the sensex does not fall much beyond 5887, a range bound movement between 5880 and 6000 can follow. Such movement will keep the short-term trend down. The upward targets in this case are 5952, 5970 and then 5987.

A rise past 6000 will face resistance from 6050 and then from 6151. Such an action will signify that a consolidation phase is in progress, not a severe correction.

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