Friday, August 16, 2013

Sensex and Nifty showing divergences at pivot lows – A rare event but what next?

By Waves Strategy Advisors, For more information visit
Indian equity market has 2 major index - Sensex and NiftySensex is comprised of 30 stocks and Nifty is comprised of 50 stocks.
Both of these indices move very much in sync and also show same Elliott wave structure most often. But this time a rare event took place. On 7th August, Nifty broke the lows made on 21st June whereas Sensex managed to protect that low on 21st June. Infact, even on closing basis the low was well protected by Sensex which ensued the rally on upside. Now this can go to the books ofpositive divergence between major indices.
The below plot shows Sensex & Nifty daily line chart
It is rare to see divergences between Sensex and Nifty but a positive divergence alone cannot be traded unless combined with other techniques like Elliott wave, indicators like Price ROC, Channels. Currently the fall of more than 750 points on Sensex and 230 points on Nifty is also a rare event. We have seen 230 points on Sensex very often but a close down by more than 750 points was last seen only during the bear trend of 2008 – 2009. Today’s rare event has led to a few probable scenarios which have to be evaluated before taking any trading decisions.
We will be carrying out scenario analysis in Monday’s update of “The Financial Waves short term update”. Also, we have constantly asked our subscribers to look at current market as a trading market and not an investment market as the major indices both Sensex and Nifty are not reflecting the serious capitulation seen in Indian equities!!!
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Useful for: How to trade, Relative analysis, Research on Indian Equity market
Related to: Elliott wave, Sensex, Nifty, Intermarket analysis, Trading

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