Sunday, November 14, 2010

Sensex: At Crucial Juncture!

Given the recent fall on 11th and 12th November in Sensex it has now become imperative to analyse the long term structure of the market since the rally started in October 2008
As per Elliott, we know that market moves up in 5 steps and come down in 3 steps. Looking at the wave counts and following the rules it is possible that the entire move up since October 2008 that started from around 7800 might be complete. It is too soon to make that bold statement unless we get some kind of price confirmation below 19900.
RSI is also showing strong negative divergence and turned down just touching 70 level a strong bearish property of RSI. Also breadth has deteriorated significantly in past 2 trading sessions
Sensex moved below 20400 level that was important support looking at intraday charts. A move below 19900 will provide negative confirmation that we are at a larger degree correction
The other plausible outcome is the current down move is only wave ii of wave 5 and we are yet to see further rally to new highs going! Current down move on short term basis is only 3 waves and so if we see rally back above 20950 we are in for new highs
In short, we are currently in no trading zone. Structure of bounce back from here will tell us if major trend has changed. Move down below 19900 will make us bearish and move above 21000 will make a case for new highs on Sensex. Let us be reactive and not predictive and listen to what market wants to tell us in next week. Till then enjoy the Break!

1 comment:

  1. Hello,
    Do u feel like many others we can have both wave 2 and 4 in complex form ??
    If so then C of 4th goin on and abt to complete...

    While I dont believe so as rule of alternation states this is not possible.
    I feel 5th of 5th already over and we are into some bigger correction in form of 5 3 5 zigzag ..

    waiting to have your inputs...