Eoin Treacy, Global Strategist of Fullermoney.com feels that the Sensex support of 9,000 is unlikely to break.
Treacy expects to see another correction to 9,000 levels. He also feels that there would be additional selling pressure in emerging markets. He anticipates rangebound activity in the markets for the next 2-3 months.
He further states that the chances of testing previous highs this year are very low. He also adds that there are higher chances of Sensex testing previous highs in 2007.
Treacy feels that all emerging mkts are still in a corrective phase. According to him, it is currently a cyclical bear market within an overall bull phase. Treacy expects new highs to continue in oil prices.
Excerpts of CNBC-TV18's exclusive interview with Eoin Treacy:
How does the Sensex look in the medium-term on your technical charts?
We had a very big decline from over 12,000 to 9,000 and that was largely predictable because the Sensex has done remarkably well over the last three years and every market is due for a correction. When a medium-term correction hits global stock markets, the question is not whether we will get the Sensex right back to the highs immediately.
The question is how long will the convalescence or the rehabilitation of this market take. It has found some resistance around 11,000 and yesterday's downward move really re-inforced that resistance. The question now is whether that support around 9,000 will really hold or not.
But I think that we are in a period of sideways ranging or right hand extension from the top. So the chances are that we will see another downleg from here, possibly seeing 9000 levels and we will see some further ranging in the next two-three months.
Do you think that the bottom where we bounce from last time around will be re-tested in the next few weeks?
I think that there are very good chances of the re-test in the next couple of weeks. But that's also true for all stock markets around the world, particularly in the European markets. We have seen that NASDAQ has already moved to new lows last week. NASDAQ is often the leader and because of the leash effect that US market has on the rest of world, there will be an addition of selling pressure being felt particularly in emerging markets.
Is that the band you would set out for this market; 9000 on one hand and 11,000 on the other? How do you set out a timeframe for how long this market will move in that range?
It is a bit early to call it a range, yet we need to see it bounce from 9,000 range. But there is a very good chance that we will see this type of ranging activity to go on for the next two-three months.
What are the chances that this market will goes back to see the highs it tested this year?
I think the chances of it going back to see the highs this year are quite low. But the chances of it making the highs probably early next year, are very high.
What do you see when you look at some of the charts of other emerging market indices? Do they also suggest that in the near-term they could be weaker or more inclined towards weakness than strength?
They do; because we have the US markets still very much in a corrective phase. A lot of those dollars that have been invested have been pulled back into US markets and US dollar has started to strengthen because people are cashing in their bets and bringing their money home. There is just not as much money in emerging markets, as there was three-four months ago. It means that all emerging markets are still in a corrective phase.
For all these markets, is it a bearish trend in an overall bullish market, or do you think a separation has begun between them?
Certainly not, this is only a cyclical bearish market with an overall bull trend. India is our favourite market for the very long-term. We think that from levels where it is today, it is probably going to multiply in the next decade.
Do you track crude on the charts?
We certainly do.
What are they looking like?
Crude oil is a remarkably volatile commodity purely because it is so remarkably political. From the chart perspective, oil has been going up in a very orderly uptrend for the last three years. We have not seen any acceleration in the last three years.
It has gone up quite a bit and it has come back a bit. Yesterday, it came off about a dollar after hitting new highs last week. It will probably come back a couple of more dollars but the chances are we will see new highs on oil over the next couple of months and indeed, over the next couple of years. It will continue in a choppy uptrend.
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