CAN NIFTY HOLD 5500 OR CRACK HARD?

The level of 5500 on Nifty is keenly watched level and bulls and bears are in for interesting tussle before this level gets taken out.

Here’s the Weekly Chart of Nifty

As you can see in the chart above – Nifty moved above 5500 in September 2012 on HOPE and since then has sustained above it. Also, on every correction post bullish move in Sept 2012, Nifty has managed to find support near 5500. So there will be hope among bulls that Nifty can defend 5500 this time again
What’s different this time?
Majority of the sectors and stocks are in terrible bear market. Even the sector that helped Nifty recover i.e. Banks appear to be in big trouble. So, bulls have very few friends to offer help. One stock that appears bullish is Reliance

 Reliance after filling the gap has bounced. The chart appears bullish with upside target of 1100. But can Reliance alone save the market? I doubt that. Reliance can offer some resistance to bearish breakdown attempts but sooner or later – it will give in. At this point of time – anything can happen. Nifty can take support and bounce but eventually – fundamentals are just too -ve for market to survive the breakdown.

S&P500 BUYING OPPORTUNITY?

 
Day before Yesterday was the lowest volume trading day.Yesterday , volume picked up in first few hours of the trading day and then again a long quiet dull day. It looked like half day with traders on leave.

As you can see in the chart above: S&P 500 futures started just below yesterday’s low and kept on selling off. The volume was pretty solid and futures made a low of 1688.75 around 10:00 am CST. That was the end of all excitement and trading volume. S&P futures managed a decent recovery on very low volumes and then remained quiet for the rest of the trading day.
Technically not much has changed. The undertone is still very bullish and there is no follow through on selling. Tomorrow, it would be interesting to see whether there is follow through to today’s weakness or not.
Pullback = Buying Opportunity?
Here’s S&P500 daily chart (spot)

Few days back, S&P500 broke out above 1696-1698 on daily chart. Today’s selling has pulled back the index to breakout point. Does this represent buying opportunity? The answer seems to be yes but remember charts are stretched and any follow through selling can create some nervousness. We are in an interesting place and the benefit of doubt should go to bulls.