The markets indeed proved to be top heavy and broke down as the “inside day” formations in the previous two sessions proved to be whistle blowers for the bulls.

As advocated, the compressed intraday range for two days were a precursor to a bigger move in the offing as the pattern is an indicator of a recoil action.

Traded volumes spiked higher and the market breadth was significantly negative. Both are negative portends on a down-tick day. The

BSE & NSE combined advance decline ratio stood at 981 : 2859. The capitalisation of the combined exchange breadth was at Rs 1013 crore : Rs 15833 crore. The derivatives data for the previous session indicated a 0.16 per cent increase in net long positions amid a rising PCR. That indicates a selling bias.

The indices have closed at the lower end of the intraday range as the selling pressure persisted till the fag end of the session. That the market breadth was negative and the volumes were higher indicate a weak scenario and the upsides are likely to be laboured and peppered with overhead supply coming from trapped bulls.

The intraday range specified for Thursday was convincingly violated on the downsides even on a closing basis, indicating the sentiments going to the bears.

The coming session is likely to witness a range of 4275 on advances and 4080 on declines. Watch the market internals very keenly in the near term for signs of commitment of traders.

The outlook for Friday is that of caution as the weekend factor coupled with margin calls are likely to be the overwhelming triggers for the markets. As I have been advocating, purchases must be avoided.