Nifty opened on a positive note moved up and made a high of 5549 on Monday and there after started to fall and continued to fall the end of the week and finally the fall has intensified. The fall of the market during the week has broken below some of the significant resistance trend lines, but still above 5350. Till the market is above 5350 the bulls can has hope and if once if it is taken out then we can see a healthy fall at-least towards 5000 levels. One of the features of the current fall is that, nifty has broken the three months trend line, i.e. the trend line drawn from the low of may 2010, thus giving an indication that bears are at strongest point than in the last three months. It has also moved blow the 15 day EMA after flirting with it for the last one week and has decisively broken below it, indicating that bears have at-least come into the market for the time being. Whether it would be a long one or a short lived one only time will tell. One of the significant features of the current fall which every one has ignored till now is that nifty has broken the trend line drawn from the low of market 2009 indicating the we might have started a fall on larger time frame, but we have to wait for some more levels to be taken out before we can thing that longer time frame fall has started. The first and the foremost thing is we have to wait for faster retracement of the entire fall from May 2010. if this happens the we can safely assume the up move has completed if not then we can safely assume that the up trend is intake. The time series analysis which I have been mentioning from the beginning of the current year is clear enough for us to indicate probable reversal. But from the march 2009 onwards there has not been entire retracement of the rise so the trend was intake. In the last one and half years the fall have been any where near the 82% of the previous falls. The market was in a trading range of 4700-5500 from July 09 onwards. The rises were in the range of 10 weeks and the fall were in the range of 5 weeks with the exception of mar 2010 fall where it was 6 weeks. In five weeks market has corrected 82% of the rise; it took 10 to 11 weeks to retrace the entire fall. Here it is clear indicating the bulls were finding it difficult to take the market up but at-least they were successful in retracing the entire fall while the bears were not successful to retrace entire rise. I have also indicated in the beginning of the current month that market would not run away from the current levels as the retracement took longer time, even though majority of the analysts were gung ho on upward movement of the market once the 5500 level was breached. Unless and other wise the faster retracement of either fall or rise takes place we can safely assume that we are in the trading range and the market would be frusta ting us like this also. The current rise has taken 13 weeks (Fibonacci again) so we have to go below the May 2010 low of 4786 in shorter time than 13 weeks and preferably in 50% time. So if the down trend for at-least short term has started we have to see for faster retracement then only we can see market drifting down wards significantly till that time we can safely assume the we are still in bull market.
It can be seen from the chart below that nifty has broken below the last three months trend line thus giving an indication that the fall might be severe. Till market moves above it we can expect a severe fall.
It can be seen from the chart above that nifty has fallen at-least by 500 points when ever the trend lines were broken as indicated in the chart. This time also nifty has broken the trend line drawn from march 2009 whether nifty would fall at-least by 500 points if would technically that would be disastrous for the market as that would break below so may technical support levels and also trend lines. I would furnish then where ever they happen.
Positives for Nifty:
§ Market is above 200 day EMA.
§ Market is above 50 day or 100 day EMA.
§ Weekly MACD is in a buy mode.
§ Weekly RSI has started to move up sharply indicating strength of up move.
Negatives for nifty:
§ Market has moved below the 15 day EMA
§ The rise is on –ve divergences with MACD histogram and also RSI.
§ Daily MACD has given a sell signal
§ - D1 as moved above +D1 indicating that bears have gained upper hand and only now DMI should start moving up to indicate strength of bears.
Elliotte wave Analysis:
In Feb-March I have indicated in my Elliott study that it would be difficult nifty to move above 5415 and 5585 and now one is violated and we have see whether the second one would be violated. It appears clearly that nifty has failed to move past 5585 this time also and whether the wave-C has completed now it appears to be so as of now. The wave break up is indicated in the below chart. The detailed analysis along with the targets I would furnish when the faster retracement of the last wave happens,
Directional Momentum index – (DMI)
Currently –D1 has moved above +D1 indicating strength for the bears. But Now we have to wait for DMI to move upwards presently it is moving down even though it is placed at 20 levels.
M.Sri Mahidar
Sunday 29thAugust 2010, Time 19.48 IST
Trend is friend
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