Friday, May 16, 2014

How elections outcome was forecasted by Equity markets?

Nifty continued to consolidate and moved within the range of 7150 to 7080 yesterday. This can be just calm before the storm. The Election event of 2009 is afresh in the minds of people when Nifty and Sensex closed circuit up after clear victory by UPA government. Isn’t it interesting to see the markets are now rallying in anticipation of opposition party – NDA to form a stable government?This is a clear reflection of events follow the freely traded markets and not vice-versa.
Equity markets have been discounting the victory over past many weeks.
In the Financial Waves Monthly update – published on 3rd May we mentioned the following -
“There has been a huge euphoria this time with record number of voters at a few of the constitutions. There is drive for change across the street and this time it is vote for change more than anything else. The PR and marketing agency for BJP has done some outstanding work to capitalize on the need for change and the slogan “ABKI BAAR MODI SARKAR” says it all. They have used the entire advertisement medium right from the orthodox method to online marketing, social media marketing, Email campaigns and nevertheless WhatsApp marketing. The slogan with various annotations has spread like fire across India and I will refrain from commenting in interior parts of country but it seemed to have worked at major cities and districts.
So in this light of vote for change how is stock market linked?
Indian Sensex has been in consolidation period since the correction started during 2008. We have seen 6 years of sideways correction till 2013 probably a triangle formation. Please understand corrections might not necessarily be a downside move but a period of no net progress equally qualifies for correction.It is post such long period of pain that people of India wants change. The psychology that is driving stock market is similar to the one that is driving the voters for elections. There is a big enough overlapping sample in both the cases. Humans tend to behave differently in situation of pain than compared to positive social mood. They want radical change in the society and tend to do or choose things which are very different than they did in past. May it be election of USA, where people chose a black president Mr. Barack Obama in history of United States of America in 2009 after the Global financial meltdown. This is a way of people expressing their anger towards the existing regime and “craving for change”.The similar type of anger can be witnessed in India against corruption, poor growth, inflation and people craving for change.
If stock market is indeed reflecting the moods of Indian people there is very high probability that we will see a radical change at the center this time.
In today’s morning report we published the upside levels for Nifty with crucial supports. See it yourself forecasting is possible even on a event day like today!
Nifty daily chart: (published today morning in our daily equity research report)
Nifty daily chart: Happened today so far
In today’s morning Equity report following was published:
Wave Analysis:
……….The rally post 6638had made the chart structure clearer compared to previous months. The steepness and angle of ascentcan be due to election euphoria but nevertheless it now has the potential to develop into an impulsive wave which was not at all clear before. An impulsive wave is a 5 wave structure with corrections taking more time than previous trending moves. So far Nifty has formed 3 waves and is currently in either wave c or wave (iii). Our bias is increasing more towards impulsive structure is based on the complex running correction in wave (ii) and angle of ascent in wave (iii).Today’s movement will reduce the number of scenarios to 1. If it is indeed a 3rd wave ongoing then a move towards 7595can be seen which is 161.8% of wave (i).This will also be around 15% movement in the month so far. In our monthly update report we have analyzed that an election month has seen movement anywhere between 18% and 30%. So this movement is in sync with that as well ……… Enjoy the ride!!!
Happened:Nifty made an intraday high of 7564. This is very close to the upside level of 7595 and missed it by mere 30 points in a rally of more than 440 points!!! This shows the power of Elliott wave and Fibonacci ratios when combined with other techniques!
If we are getting it correct and this is indeed a 3rd wave we would take the strong stand that this is just the beginning. Impulsive Elliott waves increases the predictability drastically. We have highlighted this in yesterday’s FREE article as well. SUBSCRIBE NOWand get instant access to our research team, emails, reportsand a systematic way of looking at the markets. For more details visit or Contact US at, +91 22 28831358 / +91 9920422202

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