"Our markets have closed positive on last friday, owing to short covering based on overnight US markets cues, however, week on week basis they have closed negative for the second week in succession. Bearish cross over of indices (5DSMA being lower than 20DSMA) is a clear sign of grip of bears on the markets in India and world wide. The global correction doesnot seem to be over, US markets tanke hefty 2%on friday, though week on week the damage was not that bad.
This tuesday FOMC meet holds cue for the US markets performance, as the participants are divided on the assumption, what exactly is the economic scenario of US and the view and stance of US on rate revision. Stability could return to markets once all these turbulance settles. On the last three occasions, buy support emerged in the range of 4320to 4340 range last week and on any capitulation during this week, if this support is held then markets shall have to consolidate till 15th September and rally from there on. Higher implied volatility suggests that participants are expecting higher volatility, and in the worst case scenario of heavy selling 100 DSMA 4157.62 (Nifty) & 14159.26 (Sensex) should hold as valuations become quite attractive at that point.
The first sign of weakness can be confirmed on closing of indices below June closings (Nifty 4318.30 & Sensex 14640.86) for two days in succession, which will take the correction much deeper.
Strategy for the day: Buy 4200 calls on weakness and 4500 puts on rallies in August series.
The day's range for Nifty shall be 4304 (Support) and 4488 (Resistance); Sensex shall be 14720 (Support) and 15333 (Resistance)
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