Thursday, September 19, 2013

Sensex: Is this start of next Bull trend? But let’s not pull the trigger yet!

Sensex hits highest levels since November 2010. Nifty marks biggest 1 day gain since May 2009 which was the up move post election outcome.
In order to determine major trend of the market it is important to see its monthly chart. This chart helps us to determine if the major trend of the market is indeed changing.
We can see that over past 3 months prices have been constantly closing below the previous months’ close but in current month so far prices have managed to cross above not only previous 3 month’s high but previous 3 year’s high. 
A very simple technique that helps to understand the trend is to see if the current bar close is below or above the previous bar’s high or low respectively. The current bar looks like will give a monthly closing above previous bar’s high thereby giving first confirmation that the major trend has probably changed from down to up. Strong trending moves starts with formation of higher highs and higher lows. Sensex has reversed this trend in current month. The high during August is at 19560 levels. A monthly close above 19560 has resulted into an uptrend. Sensex has now approached very close to the upper trendline that connects the monthly highs since 2008.
Sensex Monthly chart:
We have shown the above chart on 11th September itself in our daily research “The Financial Waves short term update” with both preferred and alternate possibilities.
On 11th September 2013 morning itself we have mentioned the following - Nifty / Sensexregistered one of the biggest gains seen only in May 2009 when markets closed circuit up. The daily chart of Nifty itself shows the size of the bar we have seen before. Seeing a move of more than 200 points was a rare thing before on downside, let alone a move of more than 200 points on upside. Such sharp change in single day is always going to provide very less reaction time as we have been constantly saying. The Gap up opening on Sensex broke the 200 days Moving average on upside, the later rally broke 200 days Moving average on Nifty, prices moved beyond the cluster of resistance levels placed at 5850 – 5880 without much hesitation, broke above the previous month high and achieved the right shoulder target near 5880 – 5900 levels. Such sharp up move along with Gapping action seen since 5400 is an impulsive behavior and not corrective…..In short, the trend is overall positive. If market starts sideways action it will be important to see if the overall breadth starts deteriorating or starts improving drastically. An improvement will increase the weightage towards positive breakout above 20500 on Sensex near 6100 on Nifty
On 11th September 2013, Sensex was trading near 20,000 levels and today it has crossed above 20500 levels.
So is it time to pull the trigger for long term new bull trend???
We would not get too excited here and will keep our emotions under control. It will be necessary for prices to give a monthly close above 20500. Along with bigger degree charts it is extremely important to see the smaller time frame movements for good risk rewards. We are closely watching the short term wave structure and constantly keeping our subscribers aware of the ongoing trend.
Indian markets are at extremely crucial juncture. Do not miss such important inflexion point which is probably occurring after whole 5 years!!! You can simply subscribe to “The Financial Waves Short Term Update” and see for yourself why we are saying this is make it or break it scenario for years to come. Even if we are wrong the risk simply dwarfs the reward that you can get. For subscription option visit

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