Saturday, December 4, 2010

Sensex - Turn of Events and Time Cycles at work!

We mentioned 19600 as the key level for Sensex for an upward correction. Prices moved above this level very easily and with good momentum but BSE smallcap index is still looking vulnerable and the strength does not look that strong
3.25 months Time Cycles that we mentioned last time looks to be still valid and taking Sensex higher
It is very tricky to label the down move from 21100 top to the bottom of 18950 as a clear impulsive or a corrective structure
There are couple of equally probable scenarios right now and we do not want to pick up any one of those as our preferred scenarios. The right hand bottom of chart shows the alternative bullish counts for Sensex that are equally probable at this point of time
If the upmove rally would have exhibited a corrective structure and would have shown slowdown near 19600 levels we would have been biased towards the downside but the structure of rally forces us to evaluate the bullish alternatives
A move below 19400 will confirm that the rally from 18950 was only corrective in the form of wave B and the downward trend has resumed where as a more deeper rally above 20550 will confirm that the entire down move was only corrective and we are headed for new life time highs. Time cycles are confirming this bullish alternatives and move further above 50 days Moving average will slowly raise the odds in favor of an uptrend
The entire downward move resulted in exposing of Housing Scam and from Socionomics perspective such events are bullish for the markets. Satyam scam formed wave 2 bottom of primary degree and this time Housing Scam can form wave 2 bottom of wave 5 (shown as alternative)
The nature of rally in next week will be important to observe. Even the global markets have been moving very fast without giving any prior warnings. There were times when UK market (FTSE) did not move more than 30 to 50 points on daily basis but now a movement of more than 100 points in either direction has become a routine.
When intraday volatility is so high one needs to have lesser positions and stricter risk managements even if one can be whipsawed in either direction. It is better to loose small amounts number of times than to loose everything in a single trade and be out of market for rest of the life!
In short we will wait for Sensex to either move above 20550 levels or below 19400 levels to give us a clear indication of where it wants to head!

1 comment:

  1. Reliance is forming a Diametric pattern discovered by Glenn Neely which is 7 legged.
    waves a b c d forms a contracting triangle, while e expands out of that triangle only to retrace back completely. This pattern looks similar to BowTie shape .
    As per this observation I feel wave g has started from 1100 and its possible that we can see 850 in coming weeks.