Traders are left wondering if 2008 will be the long awaited correction and so far the technical pattern suggests that we may be in the early stages of a larger degree decline.
There does remain a broad level of support between 12400 – 12450 and hopefully this could provide a base for traders to initiate short term long positions for the bounce.
Currently we can observe that after witnessing a five wave decline between October to November, followed by an ABC correction, the recent loss of 1061 points from the 13563 high appears to be a wave three type of move. Although short of some 70 points from the ideal low, we may now experience a “technical bounce” as long as the 12501 low holds.
For the near term the citied low of 12501 should not be breached and a break above 12931 is required for the upside play to come into force. Monday’s trading action suggests that traders consider the market oversold for the present moment.
However, if the analysis is correct then the upside will be limited to 12907 – 13032 which is also near the December 18th low of W1 at 13092. From there we can expect a resistance point followed by more downside. If the above area is cleared and the Relative Strength Index provides a technical buy signal then the bulls will be back in control for further upside gains.
The end of this week may see some weakness set in as historically the last week of January with contracts expiration tends to see weakness into early february.
Sandy Jadeja is Chief Market Strategist for ODL Markets and founder of www.Spreadbettingtowin.com where he teaches low risk trading strategies and money management.