Monday, February 8, 2016

Is Nifty forming a major base before strong trend? Shift in Sentiments…

Shift in Sentiments: Nifty continued to be under pressure in month of January 2016. Many street experts cited that start of 2016 has been one of the worst starts for Global markets as well. However, it has only resulted into wild gyrations within a range for majority of markets. On Nifty the low of December 2015 had been near 7551 and the high of Feb so far is near 7600. Interesting, isn’t it! Simply imagine Nifty had momentarily moved above the level seen in December 2015 but the amount of pessimism and fear January has created so far. Even a person having no know-how of how stock market works has been coming out with projections of sub – 6800 levels. I am amused at times to understand the consensus level and trust me if you ask any random person he will give you a figure between 6800 – 6900 zone as Nifty target! With all due respect, we can never be certain about future but the probability of prices reaching towards that zone is reducing with time! The projections were exactly the opposite during the period of early 2015 when consensus was Nifty for 9500++ levels. This simply reflects herding behavior that are prominent characteristics seen not only in animals but humans as well.

Figure 1: Nifty weekly chart (shown with all wave counts in Monthly research report)

Nifty underperformance near extreme level compared to Bank Nifty: The indicator below the Nifty price shows relative comparison of Nifty and Bank Nifty. A downward moving ratio indicates Nifty is relatively underperforming whereas an upward moving ratio will indicate that Nifty will outperform Bank Nifty. The ratio has been maintained at the lowest levels seen since 2008. There is high possibility that the ratio will mean revert and reach towards 0.60 levels again. This indicates that Bank Nifty is going to underperform Nifty for many months to come and this make sense as after such a sharp fall in PSU Banks we should see some consolidation or sideways action before a strong rally in that sector. In a nutshell, Bank Nifty might not give best of the returns that majority including most of the Mutual Funds are expecting but it will be other sectors that will lead the rally this time. 


Majority of the indicators right from Extreme pessimism – Sentiment indicator, 40 months Time cycle, Monthly Bollinger Band, Ratio chart, Neo wave long term counts along with 54 days Time cycle, Neo wave short term pattern, Channels are all aligned together. The higher probability scenario suggests that a ……….. should be formed in ……………..week of February and we should see some strong ………... However, confirmation of the same will be obtained only on faster retracement …….We are keeping a close tab on the short term charts to get confirmation from prices. February will be a month of surprise. Time will tell!

The above article is picked up from “The Financial waves Monthly update” that covers detailed analysis on medium to long term forecasts of Nifty, Stock picks, Global markets, Commodity, Currency and much more with applied most advanced concepts of Technical analysis like Neo wave , Time cycles, Fibonacci ratios, etc. Subscribe NOW by simply visiting the PricingPage.

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