Sensex Anticipated on 1st November 2011:
Bottom Line: Sensex cannot move more systematically in sync with Time cycles than it is doing currently.
Sensex: Time Cycles
We mentioned previously on 14th October, “Everything is so systematic that it cannot be controlled or manipulated but humans by default exhibits this natural phenomenon and makes prices move within channel, following 15 days rally, that retraces 76.4% of fall, with each down leg having 3 waves, and each 3rd wave forming positive divergences!!!
If the same systematic approach continues the current rally is only in its 6th day with approximately 9 more days to go and current up leg should also retrace 76.4% of previous down leg taking it near 18000 to 18300 levels which is also the upper end of the channel, 23.6% level of retracement level of entire rally since bottom of October 2008 (now act as resistance) and resistance line coming in from November 2009 lows (shown on 1st chart). All these precisely converge together at 18000 – 18300 levels and this should be touched on 26th October ( +/- 3 days).” Simply PERFECT!!!
This is what we mentioned again on 1st November, “On 26th October, Indian equity markets were open for only 1.15 hour on account of Muharat trading and 27th October was holiday. So ideally 28th October becomes likely date for 18000 levels and index opened with a huge gap of almost 400 points that day making a high of 17908. This is in perfect sync with the symmetry we have observed.
It is now imperative to observe how Sensex reacts from current levels. A sideways consolidation forming a rounding type pattern has been seen during previous tops near the downward sloping trendline and so we can expect a similar sideways consolidation near 17900 – 18300 levels before the down leg starts!” BANG ON!!!
Sensex formed a top near 17900 levels in 16 days and reversed from there. Prices started moving down and formed a low near 15400 levels within next few weeks as predicted. As highlighted on first chart (circled area) on November 1st clearly stated that an intermediate bottom should be in place during second week of January and BANG ON Sensex formed truncated low on 9th January 2012 at 15650. Since then we started rallying and now are close to 76.4% retracement level of previous down move. Also we are near the channel resistance which gets intersected at 17400 - 17500 levels.
If previous structure has to continue we can form a rounding pattern in form of sideways action over next few days. We can also see each rally has taken on an average 16 days and current rally is in its 16th working day today from the truncated bottom on 9th January 2012.
To conclude, up time cycle i.e. average 16 days of rally, channel resistance and 76.4% retracement all are in range of 200 points of Sensex and so it would be crucial to observe if we breakout from here. Close above 17500 will raise the odds that the rally is continuing but as long as that is not taken out we are assuming the previous similar pattern and structure is intact and we can move sideways or down from here. A move below 16800 will confirm previous pattern is intact and downtrend has resumed.
From trading perspective it is better to stay out in current week and let market prove itself which path it wants to follow, positive above 17500 or bearish below 16800!