In “The Financial Waves short term update” we published the following on the morning of 21st August 2015 “Nifty has been moving exactly as expected and decisively broke the first support at 8425. Now move below 8338 will result into faster retracement of last rising segment thereby providing 2nd stage negative confirmation that medium term downtrend has resumed. Avoid catching a low as the trend can be sharp and volatility can be high!” BANG ON!

Below charts of Nifty clearly shows why we have been constantly warning about the ongoing distribution pattern and downside breakdown!
Nifty 60 mins chart: Anticipated on 21st August

Nifty 60 mins chart: Anticipated on 22nd August

Happened: as of today at 12.30 pm

Following is a gist of update mentioned in today’s morning research report following was mentioned:

“Nifty moved exactly as expected. Prices had a strong Gap down opening on Friday’s trading session and broke the level of 8338 decisively in the first hour itself. At one point of time Nifty was down by more than 140 points however there was minor pullback which was in sync with our expectations as shown on Nifty hourly chart. A breakout from the pattern usually results into retest of neckline which we can see in the above charts. Majority of sectors except the defensive space closed negative and the pressure was seen in Midcap and Smallcap indices as well.

On a weekly basis, prices have taken out the low of prior 6 bars and formed strong bearish bar.  So now as long as we do not see close above prior week’s high which is at 8530 medium term trend will remain negative.

… US –DJIA has shown strong selling pressure after months long of distribution. If the trend in Global markets is indeed reversing then we will start seeing synchronization across the asset classes. Evencurrency – INR has started depreciating sharply against other major currency pairs. The commodity crisis looks to be finally spreading across the world equity markets. We mentioned months before how sharp fall in commodities over short period of time is not good even for country like India as it results into protectionism by commodity producing countries indirectly impacting other Emerging markets.

As shown on hourly chart, the distribution pattern looks like Head & Shoulder at the top with neckline near 8338 stands broken. The downside target as per this pattern is at 8010 which is also near the range of 1.618 * wave a. So the zone of 8010 to 8050 looks crucial. (prices have decisively breached below this level as well and made a low near 7940)

Existing short positions should continue to follow trailing stop method and lower it towards............. In short, ………”

Following was mentioned on 20th August morning research report “In a nutshell, a trending move is now due to emerge. Time cycles and various techniques are suggesting towards downside breakout. However, price confirmation will be only on close below 8425 followed by 8338Stay alert as Nifty can come out of Hibernation very soon!”

Nifty fell drastically with a huge Gap down opening… We have prudently mentioned in our daily research report few days back that break of 8425 followed by 8338 will reverse the medium term trend on downside. Prices have now corrected by more than 400 points in just 2 days of time!

This is not the time to simply relish the unrealized gains but to ensure and follow the action very closely to get the most out of the trend… It is therefore important to understand the Elliott wave structure along with other tools like Time cycles to find out how big this trend can emerge into?

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