The week was a mixed week on two days nifty was down and on Friday it gave huge break out. nifty has taken support at 5950 and there after moved sharply to close at the highest point of the week indicating that the bulls are having strong control of the market and it appears that they are not willing to given even an inch to the bears. So as long as the trend is long it is better to be on the long side or better out of the market and not to be on the short side. I have indicated at the beginning of the September that September has proved to be boon for bulls and during the entire bull market from 2003 onwards it has went on to move and make 52 highs except for September 2008 where in reverse happened and u see the same has happened the markets zoomed in September moved higher by nearly 6%. So historically what has been the trend post September rise during from the start of the bull market from 2003 onwards? Historically seeing the charts it has been observed that market has been rising continuously from September through December. So it has been observed in historical charts that market have been raising continually from September to December of each year, except for October 2006 where in it has corrected the entire rise of September 2006 and also the exception being year 2008 where in markets have corrected. So if you go by historicals we can see nifty moving up continually up to December. Any corrections would provide us an opportunity to get into the market. if historicals have to be believed if the September lows are not violated in October then we can surely see nifty rising continually upto December. Whether this would happen on not time will tell, but historicals are pointing towards a better market for bulls and we have all chances of seeing a new high for the market in this year only. So sit and enjoy the bull run till it lasts.
By this week we have completed 19 weeks of continues rise and we seems to be heading for the next Fibonacci which happens to be 21 and as per this we should rise for another two weeks at-least. Till not in the last 19 weeks nifty has not gone below the previous weeks low, so till this trend is maintained there is not problem for the ensuing bull run. If the previous weeks low is violated that we have trouble for bulls and market might correct in somewhat bigger mode.
If it is observed in longer time frame markets have been rising continually from March 2009, they have completed 19 months of continues rise and it also seems to be heading for next Fibonacci of 21 which happens to be two months away. As per this it seems that we might be seeing a market top at or around end of December or January 2011.
If we observe the monthly chart of the nifty from the 19 months it can be clearly seen that nifty has not once closed at two months low so till markets make and close at two months low there appears to be no problem for the bulls. So you can keep an alert for the two months close and if the event happens then we have be watch full.
If the monthly chart above is seen it can be clearly seen that the market has been making green/white candles from last four months and we have to see whether fifth months would also be positive one if you go buy Fibonacci it should happen. One observation which I have seen in the entire rise from March 2003 is that markets have risen continually for maximum for 5 or eight months only without any negative close and when ever it has happened for 8 months the ensuing correction was sever.
In the monthly charts for last eight years it has been observed that only twice markets have made three months low/ i.e. closed at three months low. Once it was in March may 2004 and in January 2010 and you can see in each occasion the markets have corrected in huge i.e in each it has corrected 61.8% of the entire rise. So now the even to be watched out for nifty making/closing at three months low. Till that is made we cannot expect any larger correction.
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( it has confirmed the strength)
§ Weekly stochastic is in buy mode.
§ + D1 as moved above -D1 indicating that bulls have gained upper hand and only now DMI should start moving up to indicate strength of bulls. DMI has also started to move up and at present is at 18(weekly) and any move above 20 would confirm the trend the up movement of DMI itself is indicating that the bulls are gaining upper hand.
Negatives for nifty:
§ Daily stochastic is in over bought zone and has given a sell signal and moving down, as weekly stochastic is in buy mode we might see market moving up after slight correction.
§ The rise is on –ve divergences with MACD histogram and also RSI.
Elliott Wave Analysis:
As per Elliott wave I have given a target of around 6940 for the current wave, and we have to see whether this would be achieved or not. It may be noted that markets have moved above the 61.8% of the wave-A indicated in my last weeks update and we should be heading for our next target which happens to be around 6468 and if it is taken out then we can be gunning for 6940 so keep a close watch.
It can be seen from the above chart that market has moved above 78.6% retracement of the entire fall from 6357 to 2252 so not we should be gunning for 100% retracement levels which happens to be 6357. so watch for the same.
Directional Momentum index:
+D1 is above –D1 and is moving up and also DMI is place at above 43 so we might see very very swift movement in the market. Also DMI has moved above +D1 indicating that bulls are gaining in confidence and we can see healthy movement in coming weeks.
M.Sri Mahidar
Sunday 3rd October 2010, Time 19.34 IST
Trend is friend
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