Expect 12-15% correction from recent peaks: Daryl Guppy

Q: How much lower do you think the Sensex can go in this correction? Where are the critical supports?

A: In terms of Sensex, the critical support is actually at 14,500. There is a minor support at 15,000 but that's relatively minor its not particularly strong. The bottom of the trading band is 14,500 and the key factor is this rapid fall in the market, which is in the order of 12-15% then a sideways movement for six-eight weeks before the uptrend continues.

Q: In the next couple of months you wouldn't expect the intermediate highs for most global equity markets to be crossed?

A: I wouldn't expect it in the next couple of months. We are likely to see that happen in China and what's been happening is the China market has been leading the world market in terms of behaviour. So, the Shanghai index has broken above 3,000 yesterday and today it still continuing towards the upside target of around 3,400.

Q: Have you had a look at the dollar index recently. What kind of moves are you seeing on that index?

A: The problem with the dollar is that it still looks like it's in a severe weakness but if we look at what's happened with the Australian dollar in the last two days-there is little bit divergence developing and normally we would expect with an increase in interest rates in the Australian dollar and also an increase in the gold price that the Australian dollar would be rising steadily against the US dollar but in fact its fallen and that's a bit of a concern. It suggests that some of the weakness in the US dollar maybe dissipating at this stage.

Q: There are some big stocks which collapsed in our market like Bharti Airtel and Reliance Communications in the telecom space. Have you taken a look on whether you should be buying them or they are headed further down?

A: Definitely not buying at this stage. What I need to see with those biggest stocks is coming down to support levels for a stock and then support levels holding. This is a stock pickers market and so if you are looking at something like Wipro for instance, which has a good strong uptrend, good support at Rs 580. But if are looking at Bharti there is a solid downtrend in place, just like Reliance. State Bank of India maybe a small change of rebound but its time for taking profits, sitting back and waiting for markets to hit that support level and then coming back into the market.

Q: What about gold. Where do you think that's headed from this new high?

A: I think its definitely going to go higher. Certainly the move by India yesterday to buy gold has put a floor underneath that market at the moment, so we are unlikely to see retest of USD 1,000 per ounce. But in terms of an upside with gold, we are looking at initially an upside targets around USD 1,160 per ounce and beyond USD 1,160 moving up to USD 1,240 per ounce.

Q: In the very near-term what's the support levels you are watching on the S&P and the Dow?

A: The Dow has still got the head and shoulder pattern, so long-term upside target is 11,600 but in the short-term we can see the market coming back to around 9,000, its also showing this rapid trend correction in price. So we are looking for this fall towards 9,000 and then a moving sideways pattern. With S&P, we can see coming back down to around 1,000 levels and then move sideways.

Q: What's the best trading strategy on the Nifty?

A: The best trading strategy at the moment is that you should have taken profits about two weeks ago. Let's take profit as quickly as possible. What we are looking for is that support level to be proven to hold; it's an unsafe process to buy in anticipation of support holding, we need to see that support develop and then look for rebound and relative activity within that trading band from support.