Pre - Budget Snapshot

Nifty snapshot - Budget

Today we have shown the impact of Budget on Indian Markets since 2007. As seen from 4 different charts on first page we can easily make out that the Budget day produces big movements on intraday basis but relatively small percentage movements on closing basis.

A very important thing to observe is that Budget day is actually a trend continuation event. As seen in 2010 the trend was up from the start of February. On Budget day this trend continued upward with follow-up rally for couple of weeks. In 2009 the trend was down since mid February and Budget day produced a good downward swing which also continued atleast till mid March. In 2008, after capitulating in January we were consolidating and prices resumed the major downtrend starting the Budget day atleast till mid March again. The same story stands true for 2007 a year of strong rally but downtrend seen before and after Budget.

Based on the above evidences we think if this time is no different we have seen a good down move since mid February and Budget day should resume that down trend with good intraday moves but small percentage move on closing basis. We will not fully rely on this information and to support our analysis we have shown Elliott wave structure on Nifty on 60 mins chart. We can see that prices are moving impulsively down after completing wave X and are in minute wave iv. We are left with wave v which will take us around 5100 – 5150 atleast.

Given the above scenarios during Budget season and Elliott wave structure we are bearish over short term and today the down trend will resume. Please be careful as the intraday volatility will be very high and prices might move in a particular direction based on certain event with no probable explanation. These are the spikes produced by news but major trend will resume as soon as event fades out.

Also we mentioned earlier that “The steep fall, if coincides with the “Budget day”, will be blamed on policy makers and the news media will find one more reason to explain the fall after it has happened!” We will keep 5400 – 5425 as our crucial Risk management level for the downward move.

We have analysed various sub indices like NSE midcap, IT index, Banking index and we are "NOT" seeing any positive divergences in any of the sectors.

The sentiments and mass psychology will try to find wrong things even in right decisions to sell their positions as the sentiments for us are bearish. We will still keep 5425 on Nifty as crucial Risk management level and will remain aware of the fact that we can be whipsawed given the event today. But it will save us a lot if we are wrongly placed and Budget this time becomes a trend reversal event rather than trend continuation which for now looks low probability!

Nifty: Resumption of major trend i.e. DOWN!

Nifty 60 mins

As mentioned before, Nifty broke the level 5400 and capitulated on downside to close the day at 5281. The levels we have been mentioning as key support for quite sometime proved to be prudent and we are now headed to make new low for the year below 5100 atleast.

The downward trend has resumed and yesterday’s steep fall was broad based with participation from all the sectors. Not even a single sector was in green and this was one of the biggest fall seen since past 15 months or so. We have been constantly saying since Nifty started falling from 6100 levels that we are in for a bigger degree correction and many will be taken by surprise except our readers! For now, Wave X up is complete and ride the trend down as long as 5380 is not taken out on upside.

Over next 1 to 2 days we might see some panic selling happening due to increase in margin pressure and long roll overs on expiry day. These are the times when no fundamentals will work and the sentiments which now have turned bearish will be the key driver of the markets. The steep fall, if coincides with the “Budget day”, will be blamed on policy makers and the news media will find one more reason to explain the fall after it has happened!

NSE Midcap: Moved perfectly as anticipated!

NSE Midcap
Anticipated on 31st Jan

Happened:

NSE Midcap Index:

We stated earlier on 31January 2011: “…. We are convinced that this is a higher degree correction in form of wave 2 that can retrace anywhere between 38.2% to 61.8% of the entire move up from 3000 to 9800.Our first target is the area of previous 4^th wave that comes in at 7250 and this also mark the zone for 38.2% retracement level. We do not expect any significant bounce back now before this level is achieved…” The chart above itself conveys what we want to say about the forecast. NSE Midcap gave a spike at 7220 on 10^th Feb and reversed the very same day. It beautifully touched 38.2% level and reversed. This is the power of Fibonacci when applied correctly and combined with Elliott wave.

For now, it is difficult to say that the entire down move that started in December 2010 is complete or we still have to see further leg down till 6500 levels. A move above 8250 will confirm that an intermediate degree bottom is in place. Any move below 7400 will take this index further down till 6500 levels. For short term, we remain bullish and the down move on Friday as corrective pattern, confirmation of which is obtained by move above 7900 levels!

Nifty: In wave X !!

Nifty 60 mins

Given the strength in Nifty over last week we have adopted Alternate sceanrio 2 as preferred. Friday's fall has taken many by surprise but it no where confirms that the major trend which for now is down has resumed. We are still in wave X and the trend still remains up over short term and any steep movement down from here below 5370 - 5400, we will know that major down trend has resumed and wave X up is over.

Corrective Waves B and X are very difficult to trade and are very much unpredictable. One should recharge the emotions for tough times ahead if this indeed is wave X since they are very tough to trade. As seen on Friday, Prices were in an uptrend in morning and suddenly turned down without giving any warning signs. That is what happens in waves B and X. We are assuming that a simple corrective pattern is developing upwards but we would like you to be cautious at the same time!

We are expecting minor uptrend to start again soon confirmation of which is obtained above 5495 but a deeper correction below 5370 - 5400 will mean major downward trend has resumed.

Fractal Nature! THRILLING!!!

Fractal Nature: Nifty

Came across this amazing Fractal nature shown by Nifty on 15 mins chart of past few days and Weekly chart of past few years. It is just unbelievable how accurately prices have mimicked. Even the election results gap seen on weekly chart is seen on 15 mins chart as well.

Are news driving the markets! I have my doubts!!!