The markets were predictably unable to overcome the 4500 barrier. The higher traded volumes on a down-tick day indicates the possibility of cracks in the bulls’ glass ceiling.

Traders will note two red herrings on the daily charts - a bar reversal ( close lower than the open, intraday high being the significant delta high of the current upmove and higher volumes ) along with an “outside day” formation.

Though the signs are weak as of now, the possibility of the smart money distributing at higher levels is fair. That the market breadth was negative on a combined exchange basis ( 1997 : 1870 ), adds to the evidence that the markets may seek lower levels.

The capitalisation of the market breadth was negative too as the combined exchange figures were Rs 7764 cr : Rs 8324 cr. The derivatives data for the previous session indicates a build up of fresh shorts.

The indices have closed at the lower end of the intraday range, which is a sign of weakness. The correlation between the average traded price vis-a-vis the last traded price was tilted in favour of bears. Though not a bearish indicator on a standalone basis, it raises another tiny red flag.

The intraday range specified for Wednesday at the 4500 / 4450 was validated as the bulls were unable to challenge / overcome the 4500 hurdle. The coming session is likely to witness a range of 4440 on declines and 4505 on advances.

Watch the 4440 level very keenly as the Japanese candle charts made a “ 3 white soldiers formation” recently and the 4440 level will “pierce” the last big bullish candle of the formation, effectively turning the sentiments bearish.

The outlook for Thursday is that of abundant caution as the leaders, Reliance, SBI, ITC, Tata Steel and ONGC are under an “evening attack” as per intraday Japanese charts. Bulls must exercise extreme caution and focus on capital preservation rather than trading profits.