Nifty Weekly update

Weekly technical Analysis for week ended 19th November 2010.
Nifty opened on a weak note and formed a green candle on 15th and there after started to fall and continued for the next three days. Of the last ten trading days there have been nine red candles and nifty has fallen by nearly 15% indicating that bears have offlate become strong and are trying to take the market down. One of the noticing features of the current move is that nifty has fully retraced the previous up move and closed below the low of the previous up wave. The previous up wave started from 5937 and ended at around 6338 on diwali day and there after the market has been moving down and has closed below that level on weekly basis which clearly indicates that bears were able to take the market below the low of the previous up wave thus signifying their superiority in the market. The weekly close below 5900 is not very good for bulls. Nifty has also made a nine weeks low and closed at the nine week low which clearly signifies the strength of the move. Now the bulls should immediately take the market up to show their strength otherwise its all over for bulls. Now the main point to be seen is whether the up move would take the market to a new high or not. If we go by the history of the current move nifty has bounced with vengeance whenever it has made such nine to 10 weeks low and every time it has succeeded in making a new high whether it would do this time also we have to wait and watch. If it doesn’t make a new high then we can safely assume that we have made a significant top which would not be broken in months to come.
One point to be noted is that nifty has closed blow the 50 day EMA for the first time in the current up move from the end of May 2010. This is a significant achievement for the bulls. When ever the weekly close was below the 50 day EMA the bulls have came back with vengeance whether this time also they would do we have to see whether the 50 day EMA offers resistance or not.

Now we would see what has happened in November months historically and what has followed after that. Historically speaking all the November months have not bee good for bulls. Generally and strangely in the second half of November the market tanks and generally it moves blow the low of the previous months and in the last weeks of November the up move noticed which goes on to make a new high in December and continued till the first week of January and then the market drops forming a major tops which is generally not broken at-least for next six months. we have to see whether the same repeats or not.

What Fibonacci is saying as I have been indicating that we would be completing the 21 months upside in November and after that we have all the chances of correcting and probably from January 2011 onwards. Whether this would be followed or not we have to see. As important Fibonacci period for the market is nearing to complete we have to be careful in our investments in the coming two months as we might see generally in such long up moves there is spill over effect where market continues for another month or two and makes a new high there by creating an euphoria in the market that its all over for bears and its only bull that’s left over. It may also be noted that the volumes during these periods would be very very high, resulting in distribution and there after the market tanks. This has been the history. If we see historically I have indicated previously that Indian markets have risen up to and maximum of 23 months only in 2006 and there after it has risen maximum for 20 months ending in January 2008. Now we have risen for 21 months which happens to be second highest in the history of the market (I am referring to nifty). So history is pointing that we might be forming a significant top in the coming month or so. Whether this would happen or not is a billion doller question. But it just warns us to be careful in taking investment decision. And mind you when ever the market has risen by 21 months or so we have corrected nearly around 70% of the entire rise till that date. This signifies that we might fall by around 2500 points (nifty) which would take the market to around 4000 levels. It appears to be unbelievable now but finally we would be seeing that target when ever the correction sets in.

One point to be noted is that till now there is no negative divergence in weekly or daily charts which is a significant achievement. But generally market develops –ve divergences in the final up move. Whether this would happen this time also, I have no doubt.

Positives for Nifty:
§ Market is above 200 day EMA.
§ Market is above 100 day EMA.
§ Weekly MACD is in a buy mode.
§ It may be noted that weekly DMI has moved above 30 for the first time in the entire up from march 2009 indicating that bulls are at the strongest point in the last one and half year. But now +D is moving down and –D is moving up indicating that gears might be shifting. But still weekly DMI is pointing upwards.

Negatives for nifty:
§ Market is below 15 day and 50 day EMA.
§ Weekly RSI has started to move down from over sold levels and now at 56 any move below 50 would not augur well for the bulls.
§ Daily stochastic is in oversold positing indicating that prices are closing at the lower end of the trading range. Any up move of the Stochastic oscillators has chances of taking the market up.
§ Weekly stochastic is in sell mode.
§ +D is moving down and –D is moving up and DMI has started to move up after flat and now at 24 this week it has moved from 22 to 24 thus indicating the bears might be gaining upper hand.

Elliott wave analysis:

There is not much change in the elliotte wave analysis the targets of 6425, 6811 and 7094 still hold good and we have to see whether the same would be achieved or not. I have some hope on achieving 6427 but doubt on remaining two. If we make a new high we have chances of seeing 6811 or near it with +/-100 points.

M.Sri Mahidar
Sunday 19th November 2010, Time 20.01 IST
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