Markets below 18K - Whats in store ahead.......

In absence of any positive triggers whatsoever, the markets resumed its downtrend after a brief pause on last Friday. The 'Sensex' closed below the psychological levels of 18K after almost about two months.
The movement of the broader market is much on the expected lines. The weekly chart that we described in the last post had clearly shown markets in more of a bearish zone.

Technically,
We are in this huge correction mode since November 2010.
 

The outlook for the markets is clearly downwards. Also, as mentioned in the previous post, the 'sensex' has moderate support at 17800 levels and further strong support at 17500 levels. 

Interestingly (and contrastingly), the technical indicators RSI and the Stochastic are in the oversold zone (The RSI actually lurking back in the territory above 30). Also, the sensex has retraced 62%  of its Bull run from June 2010 to November 2010. The retracement level lies somewhere near the 18K levels currently. Thus 'Sensex' is near a very important level presently.

An interesting Observation : The 'sensex' had been forming a 'Flag' shaped pattern on the daily charts as shown in the Chart. Technically, all the conditions of a Flag pattern were present:

1. The short term trend was clearly downwards

2. The flag was pointing upwards

3. The breakout happened downwards (the last Tuesday)

4. The retest of the breakout levels too happened on Friday

5. The trend again starts down on Monday 

As per the popular saying..'The Flag Flies Half-Mast' (which means that in the down-trend, the flag represents only 'Half' of the down move). Does this mean that the correction can continue till 17475?

Well, its time to wait and watch then......

Long term 'rosy' scenarios of Robust growth and consumption may become dangerous to persuade below the long term support line at around 17150.