How long this underperformance of Indian equity and currency markets will continue?

Financial markets are constantly in a flux of movement and people are trying to trade based on their understanding of fair price. 

The volatility has increased drastically over past few months as the bigger trend has probably started on downside. Volatility can be a blessing or a curse depending on whether you are placed on the right side of the market or not. During such times it is important to look at various asset classes across the globe to see if a higher certainty or predictability is plausible using Intermarketanalysis.

 In physical markets where goods of essential commodities are being sold, buyers and sellers transact with a much higher level of certainty. For example, the price of Onions tomorrow will likely be close to what it is today, recently it has also started fluctuating more than the past norms but still most of the times the fluctuations are minimal. That’s because the law of supply and demand which are measurable with high degree of certainty. Thus, price equilibrium is reached between consumers and producers.

But in Financial markets, everyone thinks that they are trading the fair price but each one has its own way of calculating the same. Also stock markets are based on discounting principle and how the company should be performing in future. This requires lot of assumptions in the pricing model and everyone has the liberty to assume what they think is appropriate to derive the fair value.

We believe, the psychology of investors decides the trend in market and this psychology moves in form of patterns or waves. R.N. Elliott discovered that the stock market moves in recurring patterns that he called waves. He formulated the Wave Principle based on these wave patterns called Elliott waves.

BSE Smallcap index weekly chart

The above chart is published in Monthly update with crucial levels and expected path Smallcap can follow.

Elliott wave helps to forecast from few minutes, hours, weeks, months, years, decades or even centuries. Our Monthly report which shows forecast for Sensex, Gold, Reliance Industries that has been a big underperformer over past few years but might soon starts its outperformance , US – Dow Jones Industrial Average that made its life time high when India has been struggling andUSDINR which also touched life time highs. In India, it is currency touching life time highs rather than stock market. But the question to ask is How long this underperformance of Indian equity and currency markets will continue? To get the answer get an insight into the Monthly and Daily equity research report.

To subscribe to any of the equity research visit the store page http://wavesstrategy.com/index.php/store.html

Useful for: Elliott Wave traders, Market forecast, Currency traders, Positional traders

Related to: Elliott wave, Elliott wave forecasting, USDINR, Dow Jones, Sensex,Gold, Reliance,Inter market analysis, BSE Small cap Index

What is long term charts of Reliance Industries, Sensex, Gold, DJIA, USDINR suggesting?

By Waves Strategy Advisors, For more information please visit www.wavesstrategy.com

From investing and trading perspective it is necessary not only to look at short term charts but to also align oneself with what the long term trends are suggesting.

It is imperative to know when the long term trends are about to reverse so that the surprise element is not there and people do react along with newswire that this was completely unexpected. Markets tend towards surprising majority of the crowd and it is upto us to evaluate all plausible scenario systematically to derive the highest probable outcome.

The below is a brief of what our “The Financial Waves” monthly report is showing:

India continues to stand independently in the Global markets with Indian currency the worse performing asset class among Asian peers. Prices of Gold has touched life time highs in terms ofINR as the currency hits life time lows i.e. USDINR made life time highs. Equity market continues to be in strong downtrend and is moving in the down wave which was pending before finally bottoming around mid of 2014.

In this research we have explained why the rally in Gold is only localized and not Global. Gold in terms of USD has so far not even retraced its high made in May 2013, let alone the highs of 2012 and 2011 when Gold topped out at $1900. Also a true rally in Gold happens when it rallies against all the major currency and does not exhibit a local phenomenon due to domestic currency.

Indian currency crisis: When the currency was at 55 we have updated about impending currency crisis and the mainstream experts are realizing it now.  Also the selloff in currency clearly explains why government interventions does not change the major trend but produce only short term spikes. If government actions could have changed the trend then Japan would not have faced more than 2 decades of deflation!

Food security Bill is said to be the main culprit for depreciation in currency and economic instability as the bill will cost 1.30 lakh crore. We do not rule out the fact that it is a huge subsidy bill which is announced exactly at the wrong time but this does not justify the sharp selloff in Equity and Currency. The trend on downside in Equity was due which we are seeing now and the fundamental logical explanation will keep coming as and when market keeps falling. Also remember the most bearish fundamentals come exactly when the market is at the bottom. However, news cannot be used to do objective trading but Elliott wave along with Time cyclesprovide the details on how matured the current trend is and what to expect next.

DJIA continues to fail around 15500 – 15600 levels and has fallen by more than 900 points from the top. Drop below crucial level mentioned below over next 2 weeks will confirm that the major trend in DJIA has probably changed from up to down. A synchronized move across world markets will always provide better trending moves.

Reliance Industries was one of the leading stocks in the bullrun from 2003 to 2008. This stock has been a major underperformer since then. However, Reliance Time cycles shown below also suggest the major bottom should be formed by ……...

To get insight into this Monthly update please visit  http://www.wavesstrategy.com/index.php/store.html and subscribe to the long term trends showed in “The Financial Waves Monthly Update”. For more information write to us at helpdesk@wavesstrategy.com or call us on +91 22 28831358 / +91 9920422202

Useful for: Long term traders, long term investors, elliott wave, Equity traders, technical analyst 

Related to: Equity market,Reliance,Sensex,Gold,DJIA,USDINR,currency,Elliott wave,technical analysis,long term analysis

Nifty & Reliance: MAKE IT or BREAK IT!!!

Nifty Daily chart:

Nifty made a low of 5355 and closed the week at 5363 near the strong support of 5350.
Following are the reasons for not taking a bearish stand even now and expecting a positive breakout:
- The wave structure of the down move from 5605 to current levels has overlapping formations and it has taken more time to correct the entire previous up move from 5300 to 5605. This looks corrective down move to us rather than new leg down
- 15 days cycle has turned up on 16^th June and Time cyclicality is not favoring bearish outlook
- 8 days Price ROC (in red) near very strong support level. This indicates markets will enter into oversold state by any further move down
- 31 days Price ROC (in blue) also an indicator of bigger cycle of 62 days took support at -9 and is showing strong improvement even when prices are moving down. This looks bullish to us
- Blue pitchfork line drawn since October 2009 crosses near 5335 levels. This line has acted as very strong support
- Red pitchfork trendline drawn from the top of Jan 2008 crosses at 5335. This should also act as a support line
- Trendline drawn connecting Feb and June low coincides with blue pitchfork line and so makes the support level stronger
- 5335 is the intersection of Blue pitchfork line, Red pitchfork line, 15 days Time cyles. If market has to rally it has to give respect to this intersection juncture
We maintain our neutral outlook even when all the above scenarios indicate positivity as we have not yet obtained positive confirmation from prices. Please understand the ultimate authority to judge the correctness of our decision is “Price”. Everything will be void if prices ignore all positive technical indications and move lower below 5330 – 5350 levels with 5335 as the KEY LEVEL.
A move back above 5450 will provide further positive evidence and confirm that a significant low might be in place. But as long as that does not happen we would wait and watch how markets are behaving from the very strong support zone of 5330 – 5350. A clear break of these levels will indicate strong negativity and we shall be ready for some serious capitulation that might happen.
Reliance Daily chart:

Reliance has been constantly losing its rank in terms of Market Cap and has been in news for almost making 2 years low. Chart is what helps us to get objectivity and see the real picture. The stock has not been doing anything since past 2 years but just consolidating sideways. It is only 50 points that differentiates from 2 year low to just 1 month low. A move above 900 will make this stock only 1 month low as the stock is in consolidation phase and not corrective phase. So a 2 year low might sound too bearish but chart helps us to see the magnitude of this statement.
The stock has broken below 880 support levels and 850-860 is the last support zone that is left. A failure of taking support near 860 will be strongly bearish not only for Reliance but also for Nifty since it has the capacity of dragging the entire market down. Price ROC is near the strong support and Reliance should atleast consolidate even if it has to go down further.
We will be strongly negative on this stock below 860 which might correct this stock towards previous low made near 500 levels over medium term horizon. Keep an eye on this stock to get a clue where major market is headed!