The 200 DMA is supposed to the dividing line between a Bear and a Bull Market. Let us take a look at how the markets have behaved ever since the Bull Run started in March 2009.
The Markets have traded below the 200 DMA 3 times in May 2010, Feb 2011 and now in May 2011. Prior to this, the markets bounced off the 200 DMA in Feb 2010.
1. Each time, the market goes below 200 DMA it seems to spend more time below it. First time in May 2010, it spent 6 days below it then criss-crossed for a couple of times for a day of 2. The low achieved was 4.2 pc below the 200 DMA.
2. The next time in Feb 2011, we spent about 40 days below the 200 DMA and the low was 8 pc below the 200 DMA.
3. This time round we have already spent 16 days below the 200 DMA and the low has been about 6.15 pc below the 200 DMA.
Now lets look at the 200 EMA.
1. In May 2010, we spent 1 day below the 200 EMA and the low recorded was 2.2 pc below the 200 EMA. In Feb 2011, we spent 46 days below 200 EMA and the low was 8 pc below the 200 EMA. This time in May 2011, we have spent 14 days below the 200 EMA and the low recorded has been about 4 pc below the 200 EMA.
2. Also, in Feb 2011, the index tried breached the 200 EMA failing 2 times and succeeding in the third attempt. We have already made 1 more attempt at 5605 and its likely we could have another go at the 200 EMA at 5615 before falling.
As the time has been going by, the index has been spending more and more time below the 200 DMA and 300 EMA indicating that the rally is weakening. This also, means the upside is capped at 5600 and at the downside we have the range 4800 to 5150 to be tested.