Thursday, May 27, 2010

A perfect touch of Trendline as Anticipated! Plausible alternative count


A couple of weeks back we gave first target for Sensex as around 16000. Prices made low of 15960 and turned! An amazing respect to expanding diagonal (Wave 5) lower trendline
We showed the path of Sensex on May 4th. Prices did move down exactly as anticipated but with overlapping formation.
Also prices did move lower near time cycles as suggested
This overlapping formation could form nested 1-2,i-ii but the more time it is taking to go down in wave iii the lesser likely it becomes to be of this structure
A plausible alternative count is this leg as Wave A/1 in form of an expanding leading diagonal
As Sensex gives respect to 23.6% and 76.4 % retracement levels similarly, Sensex has an history of formation of Expanding structure.
Prices have been behaving exactly as we have been anticipating since past few weeks and expanding structure fits well looking at global markets due for upward correction as well.
Expect further bounce back or sideways action from here in next couple of days before next major leg begins. A confirmation will be obtained by any move below 16000!

Monday, May 24, 2010

Formation of Lower Highs and Lower Lows continue!!!

Sensex has been exhibiting very clear lower highs and lower low formation. This is a classic way to confirm the trend direction
Sensex has also moved below its 200 day moving average confirming the change in trend
Key resistance level and 200D moving average resistance now lies at 16720, if prices retrace it should not cross this level
From Elliott perspective we can look at this formation as a nested 1-2, i-ii kind of development that presages a significant downfall to occur very shortly!
Alternative view suggests this as an overlapping structure in the form of w-x-y-x-z. This would suggest a new high in Sensex. The probability of this is low given the crack down in the global equity markets.
Some of the stocks in S&P500, moved below the low of May 6 (the day when US markets fall by almost 10%) thereby confirming the crash was no technical glitch!
VIX has been increasing with the fall in US markets - again a negative sign
Indian Markets have been quite resilient relatively to the global market melt down but the move down will be steep when bulls will finally give up and fail to move market significantly higher!

Monday, May 17, 2010

Ready for BIG MOVE! Happened: Sensex moved down after 2 days as predicted!

We said in our previous blog: "Expect some type of consolidation in next 1 to 2 days before this current minuette rally is over and then prices start moving down in major trend"
Happened: Prices did consolidate on 12th and 13th and then started moving down impulsively
On Sensex 16700 represented crucial level which is now taken out as I write this. The down move is for sure a 5 wave structure now and get ready for BIG MOVES on downside!
First target
/ support now comes in at around 15900

Tuesday, May 11, 2010

A (FALSE) sharp rally! Globally!



Sensex moved up by more than 500 points in single day!
Globally there was strong rally in markets like Italy, Portugal, Greece - up by around 10% each, UK up by ~5%
Rally of this sort is only a sign of emotional moves. This only indicates volatility going to be increasing in coming days and the gap is nothing but an exhaustion gap.
Unless and until Sensex exceeds 17700 levels we look at this structure as a 1- 2, 1-2 formation which shall carry prices lower very soon
Expect some type of consolidation in next 1 or 2 days before this current minute rally is over and then prices start moving down in major trend
Alternative Scenario: This is only an a-b-c correction and another leg up to new high is still pending. This is an alternate scenario and carries low probability. But any move up by more 300 points from here will make this a preferred scenario
Trade Safe: Lot of emotions get into play when markets move with such high volatility and we tend to make an impulsive trade. We realize our mistakes only when we have lost significantly. Yesterday's move will surely have triggered Stop Losses of many traders and execution of trades on stop loss is a MUST! There is no place for emotions in this market and you will be doomed if you do not adhere to your Risk and Money management strategies

Friday, May 7, 2010

Dow down 1 0 0 0 points (but recovered) VOL up 58%

We are in unprecedented times where surprise should be the last element in your emotional and mental frame work. Dow was down 1000 points at one point and time. This can be justified by saying a human error or a system glitch or blamed on automated systems, etc. but this just shows how vulnerable we are.
Even If it is a system / human error or even if trades are canceled at such extreme prices or if it is a actual fall as there were no buyers left the pulse was set racing at pressure even doctors cannot measure!!!
Volatility index up by 58%


Tuesday, May 4, 2010

Happened: Negative Confirmation!





As mentioned on 2nd April (Sunday) Sensex did open a gap down on Monday and we did see an impulsive move down continued today taking Sensex below 17200. This wave down today looks like a start of minutte degree wave 3. Given the steep fall in US and European markes expect selling pressure to intensify further tomorrow.
DJIA is falling with rising US Dollar, steep rise in VIX, rise in Bond prices, steep fall in copper, silver, oil all pointing only in one direction!
We also said how badly complacency will be punished and that is what has started.Immediate target for Sensex now lies at around 16000 where it shall find some support before another leg down.
I have said in my previous blogs many times that the top outperformer - METALS will be the worse performer. The time has gone for bottom picking but using every rise to go SHORT.

Monday, May 3, 2010

Respect for 76.4% yet AGAIN!!! Astonishing FACT!!!

In our previous blogs a few months back we have shown how cruicial 76.4% retracement levels are with respect to Sensex
We have observed 76.4% and 23.6% levels working amazingly well in past on intraday and daily charts
Sensex yet again looks like giving all "due respect" to this level but this time it is not just for a small move but the retracement for the entire fall from Jan 08 to Oct 08 has touched 76.4% and looks to have turned.
The 76.4% retracement levels comes in at 18018 and Sensex made a top of some degree (probably a multimonth top) at 18047 and closed below this level on same day (7th April 10)!
Also observe Wave 1 in late October terminated exactly at 23.6% (100 - 76.4%) level
Wave count 5 also looks complete
A gap down opening is what we expect to see tomorrow and an impulsive move below 17200 will provide confirmation that major trend is in great danger
It is time now to sit tight and see how badly complacency can be punished! Volatility is going to take control again very soon.