Election impact on stocks but trend had been already up from 5970!

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“The state election outcome with clear majority of BJP is in lines with expectations. This event can result into a strong Gap up opening today.”

It is really interesting to see that when in 2004 Congress was elected at center market continued its prior strong downtrend, then in Loksabha 2009 market closed on circuit up showing extreme bullishness and now people want BJP to be elected to stay bullish on markets. So there is no consistency in using election outcome to predict markets. But an important thing to observe is that in each of the outcome the prior trend has continued. In 2009 the prior trend was already strongly positive which continued post-election result announcement. Going by the same trend logic if we look at current scenario, Nifty has been in an uptrend since the low of 5970. It has been constantly forming higher highs and higher lows and is now in what is a dream run for anyElliottician a 3^rd of a 3^rd wave.

Nifty 60 mins chart

The above chart clearly shows an up move ongoing since the lows of 5970. This up move has constantly made higher highs and higher lows. Before the event outcome it is prudent to keep the exposure less as volatility can be high. But nevertheless we have been constantly suggesting that the trend has been positive all the while. Below is the excerpt from the 6^th December 2013morning report:

“By simply looking at the charts and Elliott wave counts it seems prices are now in wave iii. This wave iii should travel towards 6400 - 6440 levels where wave iii = 1.618 * wave i. The strong Gap up opening simply reflects the ongoing social mood as of now and expectation of BJP coming in states with majority. Socio-economic studies indicate that post period of extended correction, there is tendency of people to select the extremist parties as they are too bugged up with the existing government whom they think is responsible for the bad economy. President Obama was elected during distressed time and he was re-elected as markets produced positive returns during his tenure. So we can expect in upcoming central election people might tend to select BJP or other parties over ongoing Congress government.

Coming back to Nifty our outlook is going to be bullishbut there is an alternate possibility of wave x ongoing as shown in red on 60 mins chart. … But as long as 6190 is now intact we will stay bullish.

In short, the trend continues to be positive and existing longs can now trail stop towards 6190 levels. As high volatility can be expected keep less exposure since on Monday we can see a movement of anywhere between 150 to 200 points on Nifty. If the event outcome is as expected then we can have strong Gap up in wave iii of 3 else short term...”

Nifty is going to have an opening with a Gap up of nearly 200 points as shown by SGX. We cannot be more accurate than this. We also cautioned in case the event does not go as expected what should be the crucial levels to observe.

Many would turn bullish after the Gap up move today but the best of the trend might be missed. If our long term forecast is correct as shown in Monthly report then this can be just the beginning. At the same time knowing the short term moves is important to time the market.

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