Nifty(5326.6): The levels of 5220-5320 remain an untouched zone on the way down and as well as on the way up. Expect some gap-filling exercise over the next couple of sessions.
Nifty-Daily Charts
While this need not be a complete fill of the gap. The key for eliminating the the bullish case is an overlap into the former high of 5160 on the Nifty. The market's breadth so far has been bad, to say the least. While this may improve over the next few sessions, so far this is not a very encouraging case for the bulls.
The key as I said yesterday, is the European bond markets. The Italian spreads to German bunds have hit a new high yesterday. Higher than they were before the EFSF announcement. Now why is this important? The bond markets are telling us that the EFSF programme has done nothing to soften bond yields and when the Europeans go out to borrow next time, they are going to pay higher rates. And every country Ireland, Greece, Iceland before they went off the cliff, the bond yields started to widen in the same fashion.
The Euro also has delivered an important price action.
Euro Spot- Daily Charts
The single currency has started cave in sharply exactly off the 61.8% fibonacci retracement of the May-Oct decline. If the next push higher stops under the 61.8% level or if we see a straight drop below 1.3790 on euro spot, the christmas party for Europe has come 2 months ahead and there is going to be no party during christmas.
Reliance: Keep a watch on Reliance, if we see a negative close this week ending Friday, the possibility this is going to 700 would be a reasonable event.
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