The worst fear which every body was not expecting has happened, but the followers of these weekly updates might not have been surprised as I have indicated last week only that we might have entered a corrective phase once the support line is violated. It appears now that we might have entered as corrective market after nearly eight month. Please note the correction has started in the eight month which happens to be a Fibonacci. This has happened so many times as market tends to corrective after entering the Fibonacci month or after completion of the Fibonacci. I have been seeing for the last so many years and most of the times the market has reacted on Fibonacci months, weeks or days. So we cannot ignore the same. Last week I have mentioned that all the –ve factors are increasing and that positive factors are decreasing and the correction is round the corner and the same seems to have happened. It may be noted that nifty has broken past so many crucial support levels they are 5000 4900 and have gone below the 4700 level and just closed above it. Nifty has closed in bearish candles for two consecutive weeks this has happened for the first time in the last eight months so this cannot be ignored and taken lightly. The following has happened in this week nifty has moved below the 15 day EMA low (only third time in eight times) it has moved below decisively below 50 day EMA (only second time in last eight months). Nifty has moved below the 50 day EMA at 4850 it moved below it on Thursday opened with gap up on Friday just touched the 50 day EMA and then tanked indicating that bears are having upper hand and they are willing to dominate the market in the time to come. As nifty has moved below 15 day EMA low we should take every rise as an opportunity to short till nifty moves above 15 day High EMA which happens to be at 4993. So till 4993 is taken out during the week we have all chances of nifty moving down. Nifty currently appears to be in a very very oversold and there are positive divergences in hourly chars for RSI, MACD etc., giving an indication that bulls might stage a come back during the week. The rise which we will be witnessing this week if does not move above the 15 day EMA high we would have excellent shorting opportunity. It may also be noted that all the major stocks which constitute nifty are trading below significant support levels and it appears that broder market appears to be weak.
Now we will see on weekly charts. Nifty has made a seven week low during the week this has happened for the first time in last eight months signifying the strength of the fall. On weekly chart both MACD and TRIX has given a sell signal during the week this is the first time that these have given a sell signal after December 2008 indicating that the broder market has turned weak and we might have started a down trend which has chances of lasting for atleast 3 months. These two indices have not given sell indication even during the largest correction during the post budget week. This gives a clear indication that we might has entered a corrective phase and who ever are long on the market have to take a decision to take profit or prepared to take loss other wise they will know that atleast 50% of their portfolio would be wiped off as the bears market take very less time but they fall very fast. In weekly charts DMI is moving down indicating clearly that bulls are becoming weak and also –D1 line is moving up and +D1 line is moving down indicating the bears are slowly coming into the market
It may be noted that nifty has breached 4900 and 4700 giving an indication that we might start a vicious bear market and it is advised to book profit as has been indicated last week. We can buy when ever once again market gives such indication. Till then we have to protect our principle as we will be in a position to buy when the market gives a reversal signal.
Positives for the market :
• Nifty is still above 100 day EMA.
Negative for market.
• The trend line drawn from march low is broken
• Nifty is below 15 day low EMA.
• -ve divergences still exists in oscillators – ROC, RSI, Elder bull ray
• Volumes are not still increasing.
• DMI has given a sell signal indicating the bears have just gained upper hand.
• On weekly charts TRIX and MACD are in buy mode and are just about to give a sell signal
Elliotte wave analysis: Eiliotte wave analysis and also targets for nifty in this correction i.e extent to which nifty would correct and the period for which nifty would correct if would furnish in my next weekly update. So wait for the same.
Directional Momentum Index:
DMI is has moved from around 23 to 25.78 after giving a sell indication clearly indicating that momentum is down and that the trend( current down) is gaining momentum.
Pivot point analysis:
Last week nifty has moved won as indicated. And as per pivot point analysis nifty has broken so many pivots indicating weakness. It can be seen from the above table that nifty has moved below the monthly pivot and also yearly previous pivot (4856) indicating that nifty has become weak and the down trend may continue. As per monthly pivot as nifty has moved below it the next support level is only at 4538 and as per yearly previous next support level is only at 3355( which appears to be impossible at this point of time but can be achieved.)
Turtle Trading:
Turtle Trading - 20 day Phenomenon (gave sell indication at 4904)
Current trend – sell
Go long above – 5182
Square off - 5182
Go short below: 4682
ATR at 90
M.Sri Mahidar
Sunday 1st November 2009 Time 7:10:40 PM IST.
Trend is friend
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