Friday, September 23, 2011

Nifty Biggest decline since 2008! DJIA pushed off the cliff !

Nifty Daily chart:
Bottom Line: Nifty also sold off in the Global Meltdown. This selloff in Global markets can be BIGGER than anyone can anticipate. Ideal candidate to go short is US market’s index – DJIA!

Nifty witnessed biggest drop since October 2008 and fall by more than 4% in single day. This is one of the biggest down close since the rally started in March 2009. We can clearly see from intraday charts that Nifty opened at exactly at our support levels of 5050 – 5030, traded there for couple of hours and then started the deep correction.

Indian Rupee saw one of the biggest decline against dollar i.e. USDINR pair rallied by more than 2% in a single day indicating heavy rush for US Dollars. Also Indian rupee is falling against Euro, GBP, JPY making it the weakest among the pairs. US dollar strengthening is true across the global currency pairs and people are putting money in US treasuries as safe haven and moving out from almost everywhere. We are in Global meltdown scenario and please do not initiate any long positions as the bounce can be steep but just short lived.

We are bearish on World markets including India. Volatility is going to increase and we hope to see a trending move which is a paradise for traders. Now can be the time when Indian markets hopefully start trending even if it is down but that presents very good opportunity for trend followers.

Next support level for Nifty is now near 4790 but when capitulation happen supports rarely holds. We might sound too bearish but we want to convey the intensity of recent selloff we are seeing globally and prepare our readers for the worse!

Friday’s are not good for Indian markets and history shows that steep selloff that starts on Thursdays usually continues till Monday – Tuesday.

Alternatively a rally back above 5050 will indicate we are just moving in a triangle thereby fluctuating the emotions from fear to hope and vice-versa. But this remains very low probability.

In short, we remain strongly bearish now given the intensity of fall in 1 day and look for 4790 as support and 5050 as resistance level.

Dow Jones Industrial Average Daily chart: (as on close of 21st  Sept)
Above chart shows spot price of DJIA (US market as on close of 21st September). As we said before “NSE has launched DJIA futures contracts which help us to participate in the directional movement of US markets. The chart shows that we have fallen impulsively from 2007 to March 2009. This fall was either wave (A) or wave (1) of primary degree. After the downfall we rallied back in the form of 3 waves (W–X-Y). This upward correction looks complete at the top of 12780 on 21st July 2011. Since then we can see a steep selloff wiping off months of gains in just few days. This is the power of trending move and that was just wave 1 of primary wave (C). We shall very soon start wave 3 of primary wave (C). This wave we expect is going to be steeper than wave 1 and will be most violent wave. If our wave counts are correct wave 2 is almost complete or will get completed by end of this week then opening up wave 3 on downside atleast till 9500 – 9600 levels.”

We are looking at US markets offering better opportunity than Indian markets for traders as it is in a clear downtrend seen from above charts. DJIA by mid-day has already broken below 10700 levels thereby confirming start of next 3rd leg down. We do not think it will whipsaw again and re-enter into the channel above 11000 but we shall always be prepared for alternatives especially when volatility is very high.

In short, US markets look to have started 3rd leg down which is going to be steeper than the previous leg down. 11,000 should act as a strong resistance area and any close below 10700 will provide strong bearish confirmation.

No comments:

Post a Comment