Equity currency correlation, USDINR movement as per path shown in monthly update..!!

Correlation between Equity and Currency: Indian Equity market has continued to be under pressure over past few months. USDINR has high correlation with Equity markets during major turning juncture. However, magnitude of this correlation varies. Also the correlation depends on the period of trend. Over long term USDINR and Nifty both have moved towards unchartered territories. However, over medium to short term one can see that the reversal in Nifty is also associated with reversal in currency pair. So continued selling pressure over next few weeks in Equities will keep the trend on upside for USDINR.

Dollar showed its appreciation against Rupee which was anticipated well in advance with the help of Elliott wave theory and other technical tools and part of the research is shown below.

USDINR daily chart spot: (Anticipated on 5^th November 2015)

USDINR daily chart spot: (Happened till now)

For USDINR, in the previous monthly update we mentioned that, “short term appreciation is possible in INR for move towards 64.30 levels and then this pair should depreciate again and cross 67 mark.”  

USDINR has been moving in lines with our expectations. Prices showed appreciation towards 64.62 (spot) level and protected our mentioned level of 64.30. Post that prices have been depreciating and trading at 65.75 level.

Medium term outlook on USDINR: The weekly chart of USDINR shows that since mid of 2011 this currency pair has been moving higher in form of intermediate wave C. Within this, minor wave iv has completed at 58.20 (spot) levels and since then minor wave v has been running its course on upside. The internal structure of wave v has been corrective in nature and thus it indicates that Ending Diagonal Pattern is in formation. Nevertheless, as long as 63.50 (spot) is intact on downside, medium term trend for USDINR remains on upside i.e. INR should continue to depreciate over next few weeks.

Moving average: Recently prices have bounced back from the channel support and have been protecting the 100 weeks Exponential moving average since second half of 2014. From last 2 weeks prices have been protecting the prior bars low on closing basis and giving positive close.  Hence channel support, Exponential moving average of 100 weeks and weekly bar formation indicates that short term appreciation of INR against Dollar has completed and now depreciation can continue in the coming weeks.

In short, weakness in Indian Equity Market along with wave counts and channel support indicates that USDINR can move higher towards 67 mark in the coming weeks. As long as 63.50 (spot) is intact on downside, medium term trend for this currency pair will remain on upside.  

Happened: USDINR moved in lines with our expectation and has made high of 66.90 (spot) recently. What should we expect now?

Subscribe to “The Financial Waves Monthly Update” which covers research on Global Equity Markets, Commodities, Currencies providing medium term outlook for the same. For more information visit Pricing page

Nifty: TRIN indicator, Elliott wave, Time cycles path ahead

Bottom Line: TRIN indicator shows lot of volume already gone into short side without producing any meaningful correction confirming that 1 leg is pending on upside.

The below research is picked up from 23rd June 2014 morning research report of "The Financial Waves short term update" by Waves Strategy Advisors. For daily view on Nifty and 3 different stocks with complete Elliott wave counts, Time Cycles, combination with indicators like RSI. For subscription visit http://www.wavesstrategy.com/index.php/store.html

Nifty daily chart: (as of 23rd June morning research report)

 

 Nifty 60 mins chart:    

Chart courtesy: icharts

Announcement:

Upcoming Event in Mumbai on 12-13 July 2014

Elliott Wave- Its combination with various Indicators along with Time Cycles from the experience of Ashish Kyal,CMT

For details please visit http://www.wavesstrategy.com/index.php/training-on-elliott-wave-high-probable-trade-setups.html

Existing subscribers can avail 10% discount for registration

Wave Analysis:

In previous update we mentioned that “In short, it has been almost 9 days of correction so far and a trend is due to start. Faster move above 7600 will provide 1^st positive confirmation for a move towards 7800...”

Nifty continued to show weakness on last day of the week and closed below the previous week’s low near 7510 levels. The trend has been range bound in entire last week and the correction has already taken 10 days now. We continue to believe that one leg on upside is pending which will complete the ongoing move from 6630 levels.

As shown on daily chart, it seems the entire of the current up move is probably wave c or wave 3 which is subdividing into 5 waves. Either of the scenarios is indicating that wave iv is ongoing and once it is complete we should see wave v towards 7800 levels. This wave v will also lead to negative divergence on daily RSI which will further confirm short term topping process. The probable path over next few weeks is shown above but it is prudent to wait for price confirmation above 7600 for a move towards 7800 levels. Also near those levels we will have to closely watch the momentum and overall participation. If it is strong the current leg can extend further but if the overall breadth continues to deteriorate it will indicate a final wave v before we move down back towards 7400 – 7250 levels. The ongoing structure also looks like a wedge shaped formation with each of the up legs getting smaller. Again, development of wave v will provide vital clues & confirmation to this pattern.

Coming to short term, wave iv is ongoing in the form of double corrective pattern enclosed within the red channel. Prices are on verge of completing wave c of iv and a faster retracement above 7600 followed by 7650 will confirm that the low at 7500 is in place.

TRIN indicator measures in which direction volumes have been moving and whether the conditions overbought or oversold. We can clearly see that this indicator is at the level last seen only in September 2013 before the rally started. This indicates that lot of volumes have already moved to short side but did not produce any meaningful correction. The indicator is now in oversold zone (it is opposite compared to RSI) and some relieving action is accepted. This will result into an up move from current levels on Nifty and down move on TRIN.

In short, the indicators and other parameters are suggesting that the correction should complete and we should see an upsurge in Nifty but the confirmation of the same will be obtained only above 7600 levels. On downside 7480 will act as an important support and break below it will extend the current correction towards 7450 – 7400 levels.

For daily view on Nifty and 3 different stocks with complete Elliott wave counts, Time Cycles, combination with indicators like RSI. For subscription visit http://www.wavesstrategy.com/index.php/store.html 

Why Indian stocks nearing a multi-year breakout?

The below research is a part of the monthly publication "The Financial Waves Monthly Update" that gives an insight into world markets and focused on its impact on Indian financial markets. For more information visit www.wavesstrategy.com

After the world wide crash of 2008, the market dynamics changed and not only Indian stocks but many of the world major indices started moving in a big consolidation phase. 

We believe the entire world equity markets are interlinked to an extent and move in tandom but with lead and lag behavior. A few of the major world indices has already given breakout whereasBRIC (Brazil, Russia, India, China) the darlings during the bull run of 2003 to 2007 are lagging behind. But the underperformance and outperformance behavior is cyclical and our detailed analysis produced in current monthly research “The Financial Waves Monthly Update” shows Germany (DAX) index, Hong Kong (Hang Sang) index and Indian (Sensex) index. These markets are clearly exhibiting lead lag behavior.

Now we took a step forward and also analyzed the heavy weights of Indian equity index to understand that if Indian markets are really going to outperform over months or probably years to come.

Index heavy weights at a glance

The above 4 charts of Indian heavy weights are clearly showing a consolidation phase ongoing since 2008 onwards. But even then Sensex and Nifty are nearing life time highs is because of other few stocks or sectors that are constantly outperforming. The monthly research also shows those other stocks that are outperforming and that shall continue to do so going forward.

The time is running out for the ongoing correction since 2008 onwards and prices are nearing the breakout of multi-year. Do not miss out on next big opportunity and time looks ripe for Indian equity markets. Building the portfolio of stocks that will strongly outperform till 2020 and creating value for your investments!!!

Know more by subscribing to “The Financial Waves Monthly Update”. Also registration is easy and fast. Simply visit the Pricing page and select the product from the list and pay directly using credit / debit card or netbanking. For more information visit www.wavesstrategy.com