Nifty opened on a weak note and was weak for the entire week except for Friday where market has risen from oversold levels. The movement during the week is clearly indicating strength of the bears as they did not allow the bulls to lift even their head. But one of the features of the week is the nifty has made a lower top for the first time after so many months. The market has went up but was not able to move above 6100 which is below 6300 high made in November indicating formation of lower top. But one of the positive features of the current week’s movement is that the market did not move below the low of November at around 5700 indicating that bulls were able to support at the that level. So till that bottom is held we can assume that the bull run is intact and any movement below that would indicate the formation of lower low and possible start/ confirmation of the bear market. Nifty has moved below the 15 day EMA and also the 50 day EMA indicating weakness and at present taking support at the 100 day EMA it has taken support at 100 day EMA twice during the last 15 days which is indicating that 100 day EMA would provide a good support level for the market and any weekly close below that would be a significant event and it can possibly take market towards 200 day EMA which happens to be at around 5500 levels. As of now 50 day EMA is acting a resistance and nifty has to move above that to indicate strength. But till the 6100 is taken out the short term trend as per daily charts can be said to be down.
One of the factor which is pointing toward the probable top of the market in November is the constituents of nifty have been damaged badly in the current onslaught. Surprisingly constituents of nifty appears to be more bearish than nifty itself. And another noticing feature is that the bank nifty( index of banking stocks) has around 25% weight in the nifty and it has confirmed the commencement of the down trend technically as it has formed a lower low and another heavy weight RIL is also indicating weakness technically. except IT pack nothing is looking rosy technically so all these are pointing towards possible downside in the market. so unless and other wise something spectacular happens in the market the bears appears to have say in future of the market.
Nifty has just not completed 21 months of continues rise from march 2009 and 21 happens to be a Fibonacci and there are all chances of market correcting after this Fibonacci. I have been indicting this from last so many months and the same seems to have happened. Another point which I have been indicating is that from inception onwards nifty as rise continually above 20 months only twice and maximum was 23 months which ended in may 2006 and next was 20 months which ended in January 2008 and in all these two occasions markets have corrected by min 61.8% of the rise. so historically also technicals are not supporting nifty. so unless and other some thing positive happens in the market or nifty goes on to make a new high the chances of bulls taking control of the market are thin.
Positives for Nifty:
§ Market is above 100 day and 200 day EMA.
Negatives for nifty:
§ Market is below 15 day and 50 day EMA.
§ Daily and weekly MACD is in sell mode.
§ Weekly RSI has started to move down from over sold levels and now at 59 any move below 50 would not be good for the market.
§ Daily stochastic is in sell mode
§ Weekly stochastic is in sell mode.
§ -D1 is moving up and +D1 is moving down and at very low levels. and DMI has again moved above 20 and is moving up indicating the down move might have set in.
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. Any close below 5300 would confirm the end of the up move.
The last wave which has started from around 5300 and ended at around 6350 levels has taken 47 days and the current down move has till now completed 24 days and we have to see the market below 5300 in next at-least 20 days to confirm the end of the up move. So the next 20 trading days are going to be crucial for the market as any move and close below 5300 would confirm the down trend and if not we can see nifty moving up and making a new high.
M.Sri Mahidar
Sunday 12th December 2010, Time 21.09 IST
Trend is friend
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