Nifty opened on a positive note but not a strong note and weekly close was nearly at the high of the week indicating some strength for bulls. One of the strongest point to be noted is that during the entire week the market did not go below the low of the previous weeks indicating that bulls were successful in keeping the bears away and their strength would be know or proved only if in the coming week if they take market further up and probably above 6100 which bears are finding difficult to break. In the coming week 6100 would be the lakshman rekha for the bulls and if it is taken out then bears would run for shelter. So keep a close watch on 6100 which would be make or break for bulls. Another point of strength for the market is that market was able to move above 50 day EMA has been able to maintain above it, thus now 50 day EMA would act as support for the nifty and till it stays above it we have all chances of nifty moving up and breach of the same would be disastrous for the bulls and it happens to be at 5957 so on lower side it should offer support. So nifty seems to be having resistance at 6100 and support at 5957 so any movement on either side would have huge impact on bulls or bears considering on which side it breaks out. If nifty moves above 6100 then it has chances of taking the market towards 6200 levels. So we have to see whether the market would move and close above those levels or not. i have been mentioning from so many months that we would be completing 21 months of continues rise in November 2010 and chances of market correcting there after and also historically market have rise for a maximum period of 23 months and second highest rise was for 21 months. And we now we have completed exactly 21 months of continues rise and we have entered the 22 months. We have made high in 21st month and started to correct from that month only. Historically we have not see markets correction starting in the month of November. What has happened historically is that markets have corrected in the month of November and in December upto first half of January the markets rise and there after the market falls. We have to see whether the same phenomenon repeats this time also .if this has to happen then we should see the market raising up and making a new high or just go near the high and then fall very fast in the month of January 2010.
One point which I have indicated during the last week is that nifty has broken the 21month trend line which is bearish for the market and is still below that line only indicating that bulls are loosing strength but has to confirm it by forming a lower low and still not confirmed the same. Any close blow 5300 only would confirm the bearishness for the market.
Positives for the market:
· Nifty is above 15 day EMA( moved above this during the week), 100 day EMA and 200 day EMA
· It has closed above 50 day EMA indicating strength for the bulls.
· Daily MACD has given a buy signal indicating/strengthening bulls and pointing towards further upside movement in the market. In the current uptrend whenever MACD has given a buy signal nifty has moved by around 250 to 300 points whether the same would happen this time also only time would tell.
· Weekly stochastic oscillators is in buy mode indicating strength of bulls.
Negatives for the market:
· Nifty is exactly at 50 day EMA whether it would offer as resistance now or not we have to see.
· Weekly MACD is in sell mode indicating weakness in the market and also every rise would be sold into.
· Daily stochastic is in sell mode indicating that bears has in short term gained upper hand but as the weekly stochastic is in buy mode it seems to indicate that every sell might be bought into.
Wolf wave:
One interesting pattern which majority of analyst’s seems to have over looked is the wolf wave(WW) principle. This is one of the power full pattern which gives the clear indication probable bear market in a raising market and bull market in a bear market. The bullish pattern was formed in October 2008 ( peak of bear market)when everything around and everybody was talking about perennial bear market and confirmed in march 2009 and you know after that we have see a very long bullish market .
Now it seems to have formed WW pattern and that too a bearish pattern but it is yet to confirm the same. I am now waiting for confirmation of the same. Once it is confirmed then bulls would run for shelter. One of the advantages about the pattern is that it also gives the target after the confirmation of the trend or the pattern. And believe you this time also the target is there but it would frighten bulls away and the target is somewhere” hold your breath” around 3200-3400 levels. You or anybody would not believe the target and would not heed to same. But believe me if the pattern is confirmed then we have all probable chances of seeing the target confirmed. Now you would be having a question as to when would the pattern be confirmed? yes it would be clearly be anybodies question. I would not maintain suspense, any weekly closely preferably monthly close below 5650 would levels would confirm the pattern. Bulls should hope the market not to close below that level any close below the same then they would run for shelter. So as far as bulls are concerned as per this pattern 5650 would be the lakshman rekha, till they are above that they would not have any problem once taken out it would be end of the bull market and bulls would be running for cover and we would be seeing nifty falling by atleast 2500 points from those levels. so watch out for 5650.
Elliott wave analysis:
The two alternative which I have indicated in my last week’s update still hold good and they are provided hereunder.. Under the alternative -1 we might have made a top in November at 6350 and we might have started the down move and we might see market moving up till around 6100-6200 levels and then moving down to around 5200 levels at-least.
Under alternative -2 it appears that we might have completed the wave-4 of the wave -5 and we might have just started the wave-5 of wave-5 and we should see whether it would take the market to a new high or not. If a new high is not made it would indicate a 5th wave failure and we can see market tanking from those levels. Till 5700 is not taken out this option would hold good if broken then the option one would hold good.
M.Sri Mahidar
Trend is Friend.
Sunday, December 26, 2010 20:09 IST
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