The markets rallied initially to scale the 4386 levels ( I had advocated a resistance at the 4389 levels for Wednesday ), and turned tail to record a bar reversal.

A clear bar reversal is a stronger signal compared with a key reversal as the closing is lower than the opening when the intraday high is a significant high (SiHi) of the ongoing rally.

That traded volumes were higher than the previous session adds to the weight of evidence that distribution was evident at higher levels.

The market breadth points a negative bias as the BSE & NSE combined advance-decline ratio stood at 1645 : 2029. The capitalisation of the breadth was positive as the combined exchange figures stood at Rs 9593 crore : Rs 6170 crore.

The derivatives data for the previous session show a buying bias as the net long positions rallied close to 3 per cent but the PCR firmed up indicating fresh shorts on the Nifty.

The index has closed at the lower end of the intraday range as the selling pressure persisted till the fag-end of the session. The market breadth being negative adds to the cautious outlook.

The 4389 resistance advocated earlier is now the defacto swing reversal high inflection point and the bulls will prevail over the bears only if this hurdle is overcome convincingly. The intraday support is likely to be seen at 4315 levels. If this support holds, the chances of a short-term recovery are fair.

The market internals will play a very significant part in the near-term trend determination.

The outlook for Thursday is that of guarded optimism as long as the overseas cues are positive. If the overseas markets weaken, the selling may accelerate in the domestic markets. Traders are advised to postpone fresh aggressive long positions and hold existing ones.