Equity indices: The weak medium term technicals have finally kicked in and have pushed the markets deep into bear territory. This is in line with our expectations. After breaking below 6050, the Nifty gave up value relentlessly and has reached a critical support level. A move below 5825 can mean further downside with a potential to drag the index down to 5175 - 5200 level over the medium term. The Mid cap index (8488) too is very weak and is in a position to decline further. We see weakness ahead in the index over the medium term. A decline to 7900 looks possible.

Commodities: In the last week, Aluminium was an outperformer amongst the metals. Zinc and Copper have been subdued. Bullion looks weak however Gold appears weaker than Silver. Gold may see further weakness below $1350 and can decline to $1310. Crude may trade sideways with a negative bias in the coming week.

Currencies: The USD/INR may rise closer to 46 levels if it sustains above 45.30. Crucial support of 1.30 has been violated and the Euro/Dollar could see further declines. The USD/JPY can go higher in the coming week closer to 84.50 level. The DXY is in a sideways trend.

Nifty making a trend channel: The Nifty has made a trendchannel since October 2009. The trend broke out from the channel and almost fulfilled its measuring implication, but has now fallen back to the top of the channel. This level is indicated at 5825. A move below 5825 can lead to further declines. The trend line support as per the channel is indicated at 5175 - 5225.

Medium / long term momentum is indicating negative divergence: The medium / long term momentum indicator (MACD) is showing a divergence in its chart. The price chart has made two higher tops (8/1/10 & 5/11/10), but the corresponding levels in the MACD are making lower tops. This is indicating bullish fatigue in the chart and suggests that a phase of weakness could be developing in the trend.

Outlook: The medium term charts of the Nifty are no more in a position of bullish strength. The move this week suggests that the Nifty has begun to respond to this weakness and opens the way for further declines over the medium term. A move below 5825 can have the potential to drag the Nifty down to 5175 - 5200 levels.

Returning back to its trendchannel: The index has hit the support line of its trendchannel again after bouncing off it in the last week. The expected advance is now over and a move below 8400 can lead to further declines.

Negative divergence in momentum: We have used MACD indicator to gauge the momentum. It is seen that while the index chart has made higher tops, the corresponding tops in the momentum has registered lower tops. This is indicating that the medium term trend is losing momentum and has begun to turn weak. The trend has begun to respond to this condition.

Outlook: The Midcap has turned weak as we had expected. This weakness is likely to continue further, thus dragging the index lower. Meaningful medium term support can emerge around 7900. We expect a weak trend ahead.