Nifty opened on a strong note and there after it corrected during the entire week and has closed at virtually lowest point of the week, there by indicating that bulls are week and that bears are slowly able to take the market down and also gaining upper hand. On weekly basis it has moved below the previous weeks low indicating that bears are gaining upper hand it may also be noted that this is the first time in last six weeks that market has closed below the last weeks low and also closed lower than the weekly open. This is clearly indicating that bears are atleast having upper hand. It may also be noted that DMI is moving down during the entire rise for last six weeks which is clearly indicating that even though the market is raising the bulls lack conviction and it is difficult at present for the bulls to take market higher.
I have been indicating about the time series analysis for past few months and nifty has been correctly following then and we were able to identify the time periods during which the markets might reverse. As has been indicated by me, the entire fall of April and May has take 6 weeks and also the rise from may end till now has consumed 6 weeks and markets were not able to make a new high, which is clearly indicating that market is taking longer time to move up and shorter time to fall. Till this phenomenon exists we can be sure that market would not rise away from the current levels. I have indicated in my last two weeks update that if the market does not make high within 6 weeks that we might see the market in the same range for some weeks. I have also indicated that market for the last one year would rise for 6 weeks and would spend the next 3 weeks in 100 point range there by raising for total 9 weeks and then fall like pack of nine cards for five weeks. And it appears to be following the same pattern and we have completed 6 weeks and if the time series analysis has to be true then we might be seeing one of the boring markets for the next two to three weeks. If there is any deviation from the same then we might anticipate change in trend of the market.
It can be seen from the chart below that nifty has been moving in channels and there channels are represented by channels of blue lines and when ever these channels are broken indicated by circles market has fallen to a great extent and in each of the case has fallen to the lower trend line indicated by arrows. This time also nifty has broken the trend line drawn from the low of 4800 so whether we can see the market moving towards the last arrow which happens to be at 4900 levels. It may be noted that this time nifty has till now failed to make a new high and if nifty fails to make a new high and moves towards 4900 then this would be an exception to the previous one years move. So we have to see whether nifty makes a new high and moved towards 4900 or moves towards 4900. If it moves towards 4900 first this would be the first time that lower high would be made which would be a bearish indication. We have to see for the phenomenon to unfold.
It can be seen from chart – 2 below that nifty broken the one year trend line blue line and this signifies a very bearish signal and we should not be surprised if the market falls violently. So if it stays below the trend line then it would fall not matter the bulls try. In order to indicating strength bulls have to take market above the trend line we have to see whether bulls would be successful or not. The coming week would clearly confirm the same.
Positives for Nifty:
• Market is above 200 day EMA.
• Market has moved 50 day or 100 day EMA.
Negatives for nifty:
Daily MACD has given a sell signal.
Weekly MACD has given sell signal immediately after giving a buy signal indicating extreme weakness in the market.
All though the rise from 4800 the ADX has been moving down indicating that the up move lacked strength and it might not last long. But wait for the market to confirm.
Elliott wave:
In Feb-March I have indicated in my Elliott study that it would be difficult nifty to move above 5415 and 5585 and till now both these have not be violated so I would furnish the alternative structure if these are violated.
Directional Momentum index – (DMI)
Currently +D1 is above –D1 and +D1 has started to just move down and +D1 has started to move up indicating the bears are just finding themselves. It may be noted that during the entire rise from 4800 to 5375 DMI has been moving down indicating that bulls lack strength. While nifty has moved from 4800 to 5375 DMI has moved down from 31 to 17 currently. So unless and other wise DMI moves up bulls would not be able to take the market up.
M.Sri Mahidar
Sunday 4th July 2010, Time 20.13 IST
Trend is friend
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