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Uptrend confirmed with improving market
July, 27th 2009

The market improved further last week, with the BSE Sensitive Index finishing 4.3% or 634.04 points higher, and the nifty 4.43% firmer. The CNX 
Midcap Index gained 5.41%. DLF was the biggest winner among the index stocks with an 18.3% gain. The other index stocks to go up were Tata Motors, Maruti Suzuki, Jaiprakash Associates and Tata Steel with gains lying between 18.2% and 12%.

HDFC was the biggest loser among the index stocks with a 4.1% loss. BHEL was the only other index stock to fall with a loss of 1.1%. Gujarat NRE Coke was the biggest winner among the more heavily traded non-index stocks with a 19.2% gain. The other non-index stocks to go up included Firstsource Solutions, Satyam Computers, Glenmark Pharmaceuticals, Aban Offshore, HDIL, Jindal Steel & Power and Unitech with gains falling between 18.1% and 14.2%.

India Infoline was the biggest loser among the more heavily traded non-index stocks with a 7.5% loss. The other non-index stocks to go down included IDFC, LIC Housing Finance, Zee Entertainment, IOC, Petronet LNG, India Cements and Ambuja Cements with losses falling between 6.1% and 3.1%.

Intermediate Trend

The market is now in a confirmed intermediate uptrend, which is almost two weeks old. The uptrend started from the sensitive indexs July 13 low of 13,220, and the gains have already mounted to 2,200 points or 16.6%. The sensitive index would have to fall below 14,780 to drop into an intermediate downtrend. The equivalent for the nifty is 4,380, and that for the CNX Midcap 5,575. These figures mark Wednesday's intra-day low, as that was the bottom of the decline that took place early last week. Most global markets are now in intermediate uptrends, and the global intermediate trend is also clearly up.

Long-term Trend

The markets long-term (i.e. major) trend is up, which means this is a bull market. Over 90 percent of the more heavily traded stocks are also in long-term uptrends and above their 200-day moving averages as well. The sensitive indexs current bull market high is 15,600, which it reached on 12 June. This level would have to be crossed if the bull market were to continue. The bull market can be said to have started with the sensitive indexs October 27, 2008 low of 7,697, and has resulted in a 103% gain for the index in nine months.

Trading & Investing Strategies

Buying for longer-term investing should now be done only after the next intermediate downtrend has run for at least a week. Realty, Technology and some of the Automobile stocks have been the strongest in this intermediate uptrend, and therefore offer the best short-term trading opportunities while the rally lasts.

Global Perspective

Practically all global markets are in intermediate uptrends. Shanghai has been in an intermediate uptrend since March, while the rest entered a fresh one during the last week or two. The Dow crossed 9,000 on Thursday, and is most likely in a bull market now. It is at a seven-month high, and is comfortably above its last intermediate top as well as its 200-day moving average.

Some of the European indices have also entered major uptrends, or are close to doing so. Once this happens, a majority of the world markets will be in a bull phase. The BSE Sensitive Index had gained 3.1% in the twelve months that ended on Thursday, down one position to the 4th place among 35 well-known global indices considered for the study.

Shanghai continues to head the list with a 14.4% gain. Chile, Sri Lanka, the sensitive index and Malaysia follow. The Dow Jones Industrial Average has lost 20.1% and the NASDAQ Composite lost 13.4% over the same period . (These rankings do not take exchange rate effects into consideration).

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