Tech stocks not in rally to lead slide

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: The Sensex and the Nifty dropped into an intermediate downtrend, while the CNX Mid Cap Index is still above its intermediate downtrend level of 3,547 and a close below this level will confirm, that the intermediate trend has turned down and the intermediate rally which had started in the first week of December, has ended. For the Sensex and the Nifty to re-instate the intermediate uptrend, they will have to move back above to 10,174 and 3,111 respectively.

The major trend of the indices remains down as the indices continue to exhibit descending intermediate highs and lows. Once the CNX Mid Cap Index drops below its trigger of 3,547, the intermediate downtrend will again be confirmed and the highs attained on December 22 will be the new intermediate levels for the indices. These will also be the new targets for the indices to get back into for a major uptrend. Currently, the targets for the Sensex and the Nifty to get back into a major uptrend are at 15,580 and 4,650 respectively. The equivalent level for the CNX Mid Cap Index to get back into a major uptrend is at 6,016.

After the sharp decline in September and October, we have seen an intermediate rally taking the Sensex just above the 10,000-level. The intermediate rally was quite mild as traders looked for small profits on the long side. The statistical volatility which was very high has been on the decline and as a result there have been smaller swings in the past two months. High volatility begets low volatility and vice versa. Thus, from the current low volatile conditions, we will soon see a rise in volatility. This will also result in a good trend from the current very mild trend. The Sensex and the Nifty have a support at 9,020 and 2,750 respectively. These indices have made a higher minor high and once they make a lower minor high, traders can look for short positions as the stops will be nearby. This is likely to take some more time and the trend will remain mild till such time and traders must look for small positions in these conditions. Once we see a rise in volatility, the trend will strengthen and positions can be taken up.