Saturday, August 28, 2010

Prices breakdown from Diagonal Triangle (Wedge) after Throwover AS EXPECTED!

As we have been mentioning in previous updates that the throwover looks complete and price shall reverse below 18500, Sensex made a high 18475 and reversed the direction
Even before wave (iii) of v started developing I mentioned in previous blogs that ending diagonal is the likely pattern that should develop looking at the weak momentum and that is exactly what has happened. It is amazing to see when you are measuring the pulse of Mr. Market and understanding the rhythmic movements it is conveying. But please beware we should also be prepared for surprises and alternatives!
Sensex broke below the lower trendline of the wedge on 27th August giving away as much as 250 points from day's high.
The red direction line was shown on the chart after 17th August move and Sensex is catching up with it even now
We expect a move atleast till 17400 level i.e. the start of the diagonal triangle. A bounce from there will tell us if we have completed the major move 5 or just a minor i of primary 5
The sectors that were taking Sensex higher in past few weeks were Banking, Auto and Real Estate which also gave away key support levels on Friday's fall
The market movers like Reliance, Infosys, Tatasteel, Hindalco were already laggards in complete rally of wave v and Friday's down move added key levels breakdown for DLF, Icicibank, Tatamotors. A clear breakdown in smallcap index also added the fact that selloff was across the board
The number of declining stocks on BSE were more than 2000 in past 2 days which is not seen for atleast 3 months now
For intermarket analysts, movements on Sensex has been a great mystery as the fall came on the day when majority of global indices were in green which actually is a surprise since Sensex was exhibiting the tendency since past few months of moving sideways or only drifting (not falling significantly) lower when global markets fall and rallying as soon as get an opportunity to do so.
To summaries: Expect further fall in Sensex atleast till 17400 levels before a significant up correction ensues and nature of correction will convey the further path. A movement back above 18350-18400 level will force us to evaluate alternative scenario

Thursday, August 19, 2010

Standing on the Edge! Exact behaviour as ANTICIPATED!

Sensex moved exactly in the ending diagonal pattern we anticipated last week on our blog.
With today's rally the pattern looks complete. Today's high is just shy of few points to make all time high after the crash of 2008.
Just check a perfect division of golden ratio at wave 4 and RSI divergence at ending diagonal pattern. The 3 wave counts of ending diagonal are also very much clear. All this forces me to believe that the top is either in or a final top with a throw over will be made in tomorrow's session before we start intermediate term decline.
A price confirmation will be obtained by a move below 18000 levels!
Today's rally was sufficient enough to convert even more number of bears into bulls as they start thinking of a breakout.
Our negative view will be challenged if the rally moves above 18500 with potential of more energy left but the chances are minimal.
A long awaited trend may finally be starting....

Thursday, August 12, 2010

DJIA mimicking wave 2 correction exactly like 1987!

DJIA 1987 & 2010
DJIA mimicking wave 2 correction exactly like 1987!
Can you identify the difference in wave 2 in the above charts shown
The first chart is of DJIA in 1987 just before the crash. Wave 2 ended at 2650 and market fall to 1620 in less than 11 trading sessions
Market has mimicked exactly the same corrective pattern NOW
I was shocked to see even the retracement levels are perfectly in sync with end of waves "a" & "c" in spikes
It looks nothing changed in more than 2 decades in terms of people behaviour and psychology. It is correctly said - technology cannot change the inherent behaviour of people & they will act exactly the same way even if a millennium is passed!!!

Tuesday, August 10, 2010

Wave5 continues as anticipated…

As anticipated, Sensex found support and did not move below the level we labeled as wave (ii) of v of final wave 5
Given the weakness in the structure and failure to rally sharply even after the breakout that everyone is talking about I think we are going to develop into a Diagonal triangle pattern
The path for the Diagonal triangle is as shown
This last leg of rally has been successful in turning maximum of the remaining bears into bulls
The euphoria has picked up in the media as well and everyone is talking about the breakout but just to see prices still struggling and not moving up in a strong trend
This is just going to eat up on emotional and psychological aspect of the trader without paying much for the efforts put in
A completion of this pattern shall therefore lead to a steep decline as very short term traders starts squaring off their long positions in frustration of slow moving trend
We will update you if any variation to this pattern is developing, till then high risk traders can go long but only with a strict stop loss and also keeping an action plan ready in case of a large gap down opening!

Monday, August 2, 2010

No Negative Price Confirmation Yet, Be Cautiously Positive!



Sensex has shown an impulsive move up since last week of June

One possibility was that the 5 wave up structure was complete but given the recent strength, it looks wave v of 5 is moving up in an extended form
We have been constantly saying not to initiate any positions unless we obtain some kind of price confirmation and that strategy has paid off well. We are working on a reactive strategy rather than predictive strategy
Sensex did not move below the key levels shown and given the relative strength of Indian Markets I would like to be cautiously positive!
A long position can be initiated with a strict Stop loss 17850 over a short term period. We will update of any weakness seen or when other higher probable wave structure looks to be developing