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Saturday, February 7, 2009

Weekly Sensex Update

I have recently started posting a daily market update sourced from Trust readers are finding it useful. It gives a perspective of what is going on around the world markets.

Some of you had suggested that I write about commodities - but I'm not really qualified to do so. I've neither invested in commodities, nor tried to learn how the commodity markets work. But I do invest in metal stocks like Tata Steel and Hindalco.

Hope the commodities section of the daily world market update will provide some guidance to those of you who are interested in commodities.

From today, I will start posting a short weekly Sensex update on Saturdays. I have been posting Sensex updates and interesting patterns on an ad-hoc basis, and I will continue to do so as and when some comment-worthy Sensex pattern appears.

So, without further ado, here is this week's update.

The Bombay Sensex chart continues in the rectangular sideways pattern (which I wrote about in this post on Jan 18, 2009). The weekly close was lower than the previous week's close.

The slow stochastics (which I'll write about in a future post as I've found it quite useful for market timing) is indicating a bullish undertone that is not supported by the ROC, RSI or MACD. The MACD is marginally in negative territory, and the ROC and RSI are bang in the 50% zone. These indicate that the market remains undecided about its future direction.

For those of you who are confused by all these acronyms, there are a couple of "Useful Links" on the right panel. 'Technical Terms Explained' links to a dictionary of stock market terms that provides short definitions of each term. 'Investopedia' is a great site for all investors who want to learn more about the indicators mentioned as well as about the stock market.

The 200 day EMA continues to move down. The 50 day EMA is doing likewise and is well below the 200 day EMA. That means the long term and mid term outlook is still bearish. (More about EMAs and how to interpret them in this post on July 13, 2008.)

The 20 day EMA is flat and the Sensex is marginally above it, which is a short term positive. Volumes remain low - as they ought to be in a sideways consolidation phase.

Bottomline - wait out the consolidation phase. The lack of direction is probably making the market a boring and uninteresting place to be. That's good, because as more and more people get disinterested about what is happening in the stock market, the more likelihood of the market bottoming out.

The intrepid few can start investing in an index fund or the Nifty BeES (which I wrote about in this post on Dec 8, 2008).

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