During the week nifty opened on a weak note and there after drifted further down and there after recovered somewhat and close on a weak note only. But still nifty is above 5932 during the week nifty made a low of 5966 indicating that bulls were able to defend their support levels unless and otherwise nifty breaks 5932 there should be no hopes for bears. This is the third successive week where in nifty has closed with a red candle this is the first time that nifty has closed with three successive red candles after February 2010, the only difference between the two was that nifty has fallen very steeply during that period and this time the correction was very less thus giving an indication that bulls are defending their territory which is bad news for bears. Nifties highest close during this year was 6143 so unless and other wise nifty closes above that bulls would not gain strength any move and close above 6284( this also happens to be all time highest close) the bulls would be on rampage and would find some resistance at the all time high of 6357. So for bears to gain strength the they should see for movement below 5932 and bulls should see for close above 5284 so now the range appears to be between 5932 to 5284 and any break on either side should be watched carefully as trend would set in that direction.
On time series analysis we have completed 22 weeks and nifty is still not broken any crucial support levels indicating that there appears to be some amount of surprise on up side left in the market. If nifty goes on to make a new high during coming one to two weeks then we have all the probable chances of seeing the market raising towards next Fibonacci of 34 which happens to be another 12 weeks away and another three moths. If we see historically market has risen for more that 21 weeks in succession only twice in the last seven years, and in each of these cases markets have made significant tops which were not broken easily. So whether this time also market would move up towards the next Fibonacci of 34 we have to wait and watch.
As on lower wave structure- time period nifty has indicated that it has fair chances of raising for another 12 weeks. We would see the monthly chart also to see what it tells on the larger time frame, as generally larger time frame prevails over the shorter time frame. On the monthly chart we are about to complete 20 months and we will be entering into 21st month from November onwards. So we would be completing 21 months by November end which gives an indication that we might top somewhere in December or January 2011. If seen historically from the start of this bull run i.e. from 2003 onwards markets have not risen continually for more that 21 months in a stretch. Only higher no of months which it has rise was 20 months in January 2008. So whether market would break the trend and move ahead we have to wait and see. But as per Fibonacci it appears that we are nearing crucial Fibonacci time periods and we have to be watch full in these time periods and reversal indication by the market has to be respected and not carried away by euphoria of the market. Generally towards this end of the period market reach the euphoric which it has not happened till now, but we might see in the coming two months. So keep a watch of reversal if any given by the market.
It can be seen from the chart that nifty is finding exactly at the 15 week EMA and every time it has touched the EMA it has bounced with vengeance so for the longer time frame we can keep a close watch on the 15 week EMA and any close of the market below it would be take as a warning sign. 15 week EMA happens to be around 5800 levels so we have not problem for bulls till 5800 is held, any weekly close decisively below it would be warning bells to the ears of bulls. So keep a close watch on the 15 week EMA. Every time it is touching it, it is proving a very good entry points.
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 is at around 80 levels indicating over bought levels.
§ + D1 as moved above -D1 indicating that bulls have gained upper hand. Weekly DMI is moving higher and has now moved above 20 presently at 28 indicating that on weekly basis the markets are gaining upper hand and any correction should be taken as an opportunity to go long in the market.
§ Daily stochastic has gone to over sold region and has just given a buy signal and is moving up.
Negatives for nifty:
§ Nifty is below 15 day EMA.
§ Weekly stochastic is also in sell mode.
§ Daily MACD is in sell mode and is moving down.
Elliott wave analysis:
There is not much change as per elliotte wave analysis and would post updates when there occur any change in the structure.
Directional Momentum index:
+D1 is above –D1 but is now moving down and –D1 is moving up indicating weakening of bulls which is also indicated by downward movement of DMI from 46 to 35 So we might see some pressure on the bulls in the coming one to two weeks.
M.Sri Mahidar
Sunday 24th October 2010, Time 19.12 IST
Trend is friend
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