Sucheta Dalal :Seven up-weeks in a row? There’s a 77% chance of it
Sucheta Dalal

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Seven up-weeks in a row? There’s a 77% chance of it  

March 22, 2010

The Sensex has been on a rally for six consecutive weeks now. From 15,915 on 6 February 2010, it has rallied to a high of 17,601 for the week ending 19th March.

 

The question that comes to investors’ minds is, how long will this rally continue? Will the seventh week also be an up-week?

 

A study by Moneylife has checked out the chances of the market continuing in the same direction for seven weeks once it has been on a rally for the previous six consecutive weeks. The study is based on weekly market data from 5 January 1990. Over these 21 years, there were 22 stretches when the Sensex was positive for six consecutive weeks. Interestingly, out of these 22 times, on 17 occasions, the Sensex has been up in the next week also. That is a high rate of 77% for the trend continuing in the same direction. This has a very strong statistical significance. It indicates a high probability that the rally will continue this week as well.

 

That’s encouraging for the bulls who still are betting big on the market. If that is so, today’s 167-point decline and a possible soft opening tomorrow morning will just be the decline investors have been waiting for to get into the market. Indeed, out of the 16 times the market has ended on a positive note for seven consecutive weeks, it has continued to rally for the eighth week as well. We will wait and see how the rally progresses.  Moneylife Digital Team


-- Sucheta Dalal