Will the recovery continue on Thursday is the important question? According to market sources, the government is engaged in a discussion over enabling the buy-back arrangement. On this news, the kerb rates are also reported to have moved up. The buy-back will influence the prices of only those scrips where the managements have armed themselves with enabling resolutions. As some gains have been made on Wednesday by picking up scrips at low values, it remains to be seen if there is buying at higher levels as well. For that would depend on the market perception, post-budget. The high excise levy is expected to affect both volumes and margins for corporates.

Technically speaking, 3485 happens to be an important resistant level, with reversed head and shoulder formation below this level. TheSensex bounced back at this level. On the other hand, it appears that the fundamental news of buy back, plus buying by UTI were really the reason for the bounce back. Earlier the Sensex failed to develop any bounce.

One must also carefully note that the index had earlier failed to take support at the 38.2 per cent retracement level at around 3590. This had forced a further evaluation that the Sensex could slid down to 3380 and later even to 3220 levels. One needs to review Wednesday's market recovery in this context. The Sensex continues to slide through the downslope trend channel starting at the peak of 4322. It has bounced off on Wednesday at the bottom support of this channel. On recovery, say over the next 7-8 sessions, it will come to test the 3700-level.

Unless it breaks that it would move down again. If the recovery is shorter, it could test the upper line at 3740. The Sensex is still travelling below its 12-day exponential moving average, which is at 3751. A change in trend can come only when theSensex crosses over 150 points. The Sensex is also below the 32-weeks moving average which is at 3682. The index is also below the 200 days moving average which is at 3751. This depression has long term bearish connotations, and indicts against long term investment just now. On the other hand, there could be a short-term intra week recovery on Thursday.