The stock markets seem in a limbo. Share bazaar had witnessed a sharp correction since the beginning of 2008. Now the markets seem stuck in a range. Most retail investors are sitting on the sidelines, having lost money and nerve in the recent downward spiral. Most experts agree that there may be some more pain left in the stock markets before they start moving up again. Let us take a look at what the technical analysts are suggesting:

INTERMEDIATE TREND:

The stock market indices are still in an intermediate downtrends, though they are now very close to their uptrend trigger levels. The CNX Midcap index already entered an uptrend on Friday by crossing 5,695. The levels to be crossed for a new intermediate uptrend are 14,673 for the Sensex and 4,399 for the Nifty.

The downtrend had started on July 12, and was over two weeks old at Thursday’s low. The intermediate downtrend cost the Sensex 1,577 points, which work out to 51% of the 3,066 points gained in the previous uptrend. A bull market will become a possibility if an uptrend were to develop around these levels, as the Sensex will then be making a much higher bottom than the preceding one of 12,514 established on July 16.

Several global indices including the Dow Jones have just entered intermediate up trends, and this should result in one here as well, since we have been one of the strongest global markets in the past month.

LONG-TERM TREND:

The indices have falling intermediate tops and bottoms, and are therefore, in major (i.e. long-term) downtrends. This means we are still in a bear market. The market’s long-term trend will turn up if the Sensex closes above its last intermediate top of 15,580.

The equivalent for the Nifty is 4,650, and that for the CNX Midcap is 6,016.A bull market certainly looks possible now that the indices are on the verge of making higher intermediate bottoms. Many of the global indices have also established higher bottoms.

TRADING & INVESTING STRATEGIES:

Long-term investments can be made, now that an intermediate uptrend appears to be on, and a bull market is also a possibility. At this stage, realty, construction, fertilizer and cement stocks are the laggards, while most other sectors are doing better.

Swing traders are likely to do well by playing on the long side once an intermediate uptrend is established. Day-trading opportunities will be best in mid-caps. Remember that proper risk and money management is more important for profitable trading than betting on the market’s direction.

GLOBAL PERSPECTIVE:

Several global indices have entered intermediate up trends with the latest rally, and the rest are not far behind. Most global indices are in long-term downtrends, but many have higher intermediate bottoms now. The Dow Jones can enter a bull market if it stabilizes above 12,000 to enter a possible bull market.