Market seems to be precariously poised for some action both – technically and fundamentally. Fundamentally – as we are in the crucial Budget week, which can set the tone for the near term trend, and technically this is how…

Yesterday was a trend down day and it was apparent in the first 10 minutes itself. The markets (Nifty Futures) opened at 8,945 which also was the high of the day and trended down closing near the lows of the day. I think it’s self-explanatory that the bears were dominating.

The interesting point is that every time we have corrected, we have rebounded back strongly making a new high.

In September we corrected 5 per cent but then rallied hard to make a new high in early December. Similarly correction in December was followed by a new high made in January 2015.

Again in February we corrected another 5 per cent and since then attempted to rally. However this time around the markets have struggled to make a new high.

Basically in early part of 2014 we were making higher highs along with higher lows. This time around we are struggling to make a new high. Now if we have not made a new high and we continue to trend lower and break below February lows then we have breached this Higher High and Higher Low trend.

If we do break below February lows then we will enter into a short term bearish phase of Lower Highs along with Lower Lows.

I am not suggesting that we will break below February lows. I am just highlighting the significance of February lows. Interestingly this setup coincides with the most important event (Budget) that almost every market participant is looking forward to.

I don’t know what the Budget will bring, but if it disappoints and we do break below February lows of 8,498 then the markets will be in serious trouble and the NSE Nifty will correct to 7,900-7,950 levels at least.

(Samir Gilani, independent market analyst)