Markets to Bounce UP on Monday

The European Summit in Brussels did not deliver what the markets expected, but the bounce-back registered by the US markets will prompt the bears to cover their shorts. This bear scampering to cover will ignite a short-term rally when the markets open Monday.

This will be quite in contrast to the general sentiment that prevailed on Friday when the markets downed their shutters for the week. The Nifty had closed at 4866, registering a fall of 184 points for the week.

The lowest point for the week was reached Friday when the Nifty tumbled to 4841 in late afternoon trade. In doing so, the markets have effectively filled the gap that was created between the levels of 4866 and 4916 in the trading that happened between 29th November and 1st December.

There's not much that we can carry home in terms of conclusive evidence when a gap is closed. Gaps tend to act as supports till they are not filled. But once they are closed they can make one more effort to move up. Friday's action of closing of the gap could give the Nifty a small bump higher.

What transpired at Brussels?

While the leaders have talked of 500 billion Euro funds and 200 Billion Euros for IMF, there was no discussion on how and when this fund comes.

The feeling one gets after the meeting is that the job is still incomplete.  A half-baked pizza has been served.

Some more baking will be required and that will take time. We will continue to look at the bind markets for directions.

Short-term rally

However, the markets could still do well when they open Monday because the US markets have surged, largely on their higher consumer confidence and partly due to the conclusion of the meeting. Perhaps, what was achieved was better than market expectations.

So we could have a short-term rally on our hands.

The Dow Jones Industrial Average rose 186.6 points, or 1.6%, to close at 12,184. The S&P 500 added 20.8 points at 1255 and the NASDAQ gained 50.5 points at 2647.

For the week, the immediate support is at 4841, then at 4754 and the last post at 4639. On the higher side, 4918, the earlier support will now become the immediate resistance. The next areas of resistance are in the 5050 region and the final frontier at 5100.

We will revise this post on Monday morning info on domestic and international events.

Don?t lose sleep over the weekend. The markets will not let you down on Monday at least, courtesy the short sellers.