Monday, May 24, 2010

Formation of Lower Highs and Lower Lows continue!!!

Sensex has been exhibiting very clear lower highs and lower low formation. This is a classic way to confirm the trend direction
Sensex has also moved below its 200 day moving average confirming the change in trend
Key resistance level and 200D moving average resistance now lies at 16720, if prices retrace it should not cross this level
From Elliott perspective we can look at this formation as a nested 1-2, i-ii kind of development that presages a significant downfall to occur very shortly!
Alternative view suggests this as an overlapping structure in the form of w-x-y-x-z. This would suggest a new high in Sensex. The probability of this is low given the crack down in the global equity markets.
Some of the stocks in S&P500, moved below the low of May 6 (the day when US markets fall by almost 10%) thereby confirming the crash was no technical glitch!
VIX has been increasing with the fall in US markets - again a negative sign
Indian Markets have been quite resilient relatively to the global market melt down but the move down will be steep when bulls will finally give up and fail to move market significantly higher!

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