Nothing unexpected took place last week. The southbound consolidative bias in the market saw the futures contract moving within an upper boundary of 1,073 and a lower boundary of 1,052.5.Inherent weakness in equity market resulted in the July contract being traded at a discount to the underlying composite index. With sentiment turning more cautious and in the absence of a strong catalyst, and the discount to the cash index is likely to remain.
Signals on the technical indicators remain decisively flat with most of the oscillators staying in the neutral region with the exception of the more sensitive Commodity Channel Index (CCI). Its crossover into neutral territory did ignite some concern of heavy consolidative sentiment where volatility and liquidity may be a worry, especially for traders with bigger positions.
As the decline of the ADX indicator was rather subdued, it may result in an equally slow readjustment into both the extreme territories. Besides this, the negative crossover on the Moving Average Convergence Divergence (MACD) indicator further signals the return of bearish sentiment. Moving into this week the spot contract is likely to see its momentum continue heading south gradually with focus remaining at key support line.
Extension of negative pressure may draw the July contract back to the key 1,050 support. Tactically both the Relative Strength Index (RSI) and the stochastic indicator ended at the neutral region, showing that momentum is still easing. Fear of an extensive correction, however, is overcome by the expectation that the market would hold above the 1,050 level. A technical breach below this level could invite a rebound back into the prices. The rebound may take it to its revised resistance line at 1,080 in the absence of a catalyst.
Technical outlook
The MACD indicator remains negative with the faster below the signal line. Both lines at the positve region. The daily RSI closed at the neutral.The daily CCI finished at the neutral.
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