Indian market selloff: FED or RBI is to be blamed?

The below research is picked up from "The Financial Waves short term update" daily research report by Waves Strategy Advisors. For more details visit www.wavesstrategy.com

Many traders or analysts are blaming either FED tapering responsible for selloff in Emerging markets or RBI responsible as it raised key policy rates. 

This might sound logical but not necessarily the reason for selloff. Last time when FED reduced bond buying program US markets rallied on the same day and after RBI raised interest rates on28^th February 2014 Nifty momentarily entered into positive territory. So if news or events are responsible for market trends than why the contrary movement to the news?

Now read below the analysis by using Advanced technical analysis like Elliott wave, Channels,RSI, Time Cycles etc that is shown in “The Financial Waves short term update” research report published daily.

On 24^th January 2014 we mentioned that “Nifty continued to struggle within the zone of 6320 – 6380. The up move is with less power so far. Trade cautiously! In short, we continue to look at the overall structure as topping with resistance level at 6380. Move below 6280 will indicate minor negativity and if prices fall below 6240 impulsively we will get further negative confirmation.”     

On 25^th January 2014we mentioned that “It is time to get ready for dynamic and volatile environment again. The narrow range bound movement affects our psychology and conditions us to think of 50 to 60 points move on Nifty as big enough. During August – September 2013 we have witnessed moves of more than 150 points. So get ready if that is about to happen again.

Nifty finally broke below the level of 6280 and that too impulsively indicating a possible top near 6355 levels. The fall on Friday was across the sectors and all the major sub-indices includingPharma and IT closed negative. If Nifty has a Gap down opening it will be important to see if the Gap can remain unfilled today. Giving little leeway existing short position should now trail stoptowards6320 levels.”

On 29^th January 2014 we mentioned that“Nifty short term outlook: The severe selloffseen over past 2 days spread across the broader markets as well clearly indicates that an important top is in place. Looking at the time perspective the complete up move from the low of 6139 to 6355 in 9 days is retraced in mere 2 day’s time. In short, the near term trend remains firmly negative …..”

Nifty 60 mins chart: (showed on 24^th January 2014 morning)

Nifty 60 mins chart: (Happened as of today expiry)

Happened: We have been constantly cautioning our subscriber since Nifty had been trading in the zone of6320 – 6380 levels. Prices reversed exactly in between of these levels from 6355 and broke the important level of 6280 followed by 6240 which confirmed our bearish outlook. We constantly advised to use trailing stop method in order to ride the trend on downside as Indian markets have a habit of moving either with Gaps or very steeply giving little reaction time. 

Nifty has moved from 6355 levels and made a low of 6027 today. This move has happened in less than 5 days. Such strong trending moves simply reflects why one should be always alert when trading even when markets are moving in narrow range as the volatility is cyclical which increases and decreases in timely fashion. We have accurately captured this move and there is more to it!

If markets would have moved logically based on news outcome then making money by trading would have been a cake walk for everyone. But there is something else that moves the market and we are closely tracking those patterns! Subscribe today “The Financial Waves short term update” and see yourself the answers to why, when, where Indian markets are headed from here. Visit the Pricing Page for subscription options.