Nifty may retest 5200 and then go to 5700: Daryl Guppy

The global markets have been muted over the last few sessions. In an interview to CNBC-TV18, Daryl Guppy, guppytraders.com says the global markets are sitting at a critical point waiting for Jackson Hole meeting. "If the announcement is bullish then we can expect to see a very powerful breakout above resistance, with the S&P’s upside target of 1,560," he adds.

For the Nifty, Guppy says, strong support level is at 5,200. "We have moved above 5,200. We are looking now for a breakout move towards 5,700, but we are anticipating a pullback and a retest of 5,200 as a support level. So, 5,700 is our upside target, but we are looking for a retreat and a rebound behaviour," he asserts. Also read: Use correction as an opportunity to buy equities, says StanChart Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Q: Where is the S&P 500 headed? We have seen it cross 1,400, but several technical experts were saying that 1,420 would be a formidable resistance. It’s proved to be that way, until now. What’s the resistance now? What is its more likely trajectory in the next few weeks? A: We are reckoning that all markets are sitting at a critical point waiting for what’s coming out of Jackson Hole. That means they are sitting on resistance. The key factor there is that if the announcement is bullish then we can expect to see a very powerful breakout above resistance, with the S&P’s upside target of 1,560. But if the announcements of Jackson Hole are considered to be bearish then we will see a strong reaction away from these resistance levels with the S&P retesting around 1,350 or potentially even lower. So, reaction coming out of Jackson Hole is critically important. Q: How quickly can it climb 1,560, if indeed there is something positive like a quantitative easing? A: This is one of the phases of strong resistance levels. They take a lot to break through. That’s why we haven’t seen this breakout take place for quite a while. But once the breakout takes place then the market tends to move very-very rapidly. We would expect to see a rapid move above 1,420, maybe towards 1,570 followed by a retest of 1,420, that’s your buy opportunity, if you missed the first time around and then a strong continuation towards 1,560. We calculated 1,560 by measuring the width of the consolidation band and projecting it upwards. Q: What exactly are you making in terms of technical levels for the euro in particular, especially with regards to the dollar index, if in case there is something that comes out on Friday? A: Let’s take the euro for a start. The euro is still in a prolong downtrend that started back in 2011. That means that we can go to 1.27 and still be part of that downtrend; 1.27 is the value that downtrend line. A reaction away from that gives us a downside target of around 1.20. So, we are still bearish in terms of the euro. In terms of dollar index, we have the reverse situation. We have a long-term uptrend line that started back in August 2011. The current value of that uptrend line is 81.5. We are sitting on a weekly chart. We are looking for a rebound from 81.5, a retest of 84 highs and potentially going through to 85. _PAGEBREAK_ Q: You said that the downside for the S&P 500 is 1,350. That’s not so much of a downside compared to the upside that you have of 1,560. Would you say that markets would still basically remain in a bullish trend? A: It’s still in a bullish trend. We give that 1,350 downside target because that’s the lower edge of the long-term Guppy Multiple Moving Average (GMMA). That tells us that’s where investors’ support coming in. Technically, the strongest support level is at 1,270. But we think, at this stage, that the GMMA will absorb any selling pressure that comes back. If QE3 doesn’t go ahead, yes, it will be a disappointment for the market, but the underlying secular trend of S&P is still relatively strong. Q: What about gold? It’s shown a fairly decent comeback. How would you chart it for the next 8-12 weeks? A: Gold is in a rally environment at the moment. If we look at gold, you have an upward sloping trading channel. The lower edge of that trading channel, which was broken several weeks ago, now acts as a resistance level. So that means that we can rally very rapidly. But once we move back into the width of that trading channel, the momentum will slow. So we got a fast rally moving into strong resistance. Q: We have had a strong run for the Indian market in the past month, 6% higher. What sort of levels are you working with on the Nifty? A: For the Nifty, the strong support level is at 5,200. We have moved above 5,200. We are looking now for a breakout move towards 5,700, but we are anticipating a pullback and a retest of 5,200 as a support level. So, 5,700 is our upside target, that’s where our longer term resistance is, but we are looking for a retreat and a rebound behaviour. Q: I didn’t get your exact level for gold. Where do you see the support coming and where do you see the resistance? A: The resistance is the value of the underlying trend line in the trend channel. Upside levels are around USD 1,850 per ounce, ofcourse that changes over time because that’s a rising trend line. Q: What is your opinion with regards to the Indian technicals vis-à-vis other emerging markets and maybe even if you could just sort of compare it to the Asian basket as well for us? How strong are we technically at this point? A: Technically, Indian market is in a stronger position than Korea, Taiwan, Singapore, and certainly China. The key reason for that is that the downtrend that’s been in place since early 2011 has been decisively broken. Early in 2012, we had that rally, retreated, came back and tested that downtrend line. It’s now acted as a support level. So, technically we are in a stronger position. But that doesn’t mean that we are going to rush forward and retest Nifty highs of 6,400. It’s a very-very slow recovery. Q: What about Brent crude? A: We look at NYMEX crude rather than Brent crude. We are moving towards USD 100 per barrel level. That will act as a strong resistance level. NYMEX and Brent are also tracked in the sideways trading band. We have rallies within the trading bands. NYMEX crude is defined by support at USD 98-100 per barrel, very narrow resistance level, coming back to the support at USD 88 per barrel and again on USD 78 per barrel. So, we are simply moving between those bands.