Nifty opened on a weak note and continued to be weak for the entire week and the closing was near the low of the week which is clearly indicating that bulls have lost ground and bears are continuing to strangle bulls. It appears that bears are having upper hand and it appears that it might continue it to some time to come. There are so many technical events which are happing and which are pointing towards the probable top of the market has already in place and we might have started down trend which might last for long time that what has been seen in last 22 months. So if new high is not made in the coming month or two then it would confirm that top has been formed. It has not indicating that formation of top but confirmation of the same is pending. So we have to wait for confirmation of the same. One of the important technical events that have taken place during the last two weeks is worth noting and are indicating towards probable top is already in place. Nifty has for the first time in last 22 months has formed a lower high and is followed by lower low which is clearly indicating that we might have topped out. Till now in this bulls market we have not formed a lower low and this time we have formed the same indicating that the trend might have turned down. Another important technical event which is pointing towards further weakness is that nifty has moved below 50 day EMA and also 100 day EMA and is finding resistance at 100 day EMA which is pointing towards weakness. Nifty is not exactly placed at 200 day EMA and we have to see whether long term funds would offer support to the market if not then we can assumed that up trend is certainly over. From April 2009 onwards markets have not closed below the 200 day EMA on weekly basis we have to see whether we would see the phenomenon now. The break of the 200 day EMA on weekly basis does clearly point towards probable top and also long term funds are not offering support to the market and further down sides are not ruled out.So the next one to two weeks are going to be crucial as the market is going to give a crucial support or a break down.
I have been pointing towards market topping in January from last so many months and is appears that this time also market has turned down in January. I have been indicating from so many months that market has been raising for 21 months and after completion of the same the market has all the possible chances of falling/reversing the trend and the market has exactly turned after completion of 21 months( where 21 appears to be a Fibonacci). Another historical thing which is prudent to note at this point of time is that when ever market has rise for 21 months or so it has corrected by nearly 70% of the total rise or of that wave. In the present case the market has risen from 2539 to a high of 6338 a rise of around 3800 points so as per this time analysis we have to correct around 70% of the 3800 so a fall of at-least 2660 points from the top of 6338 so the target comes to around 3678 for nifty so considering this nifty should fall by another 2000 points. So be prepared for the fall and don’t say that you have not been warned.
The below chart is clearly indicating formation of lower low and also lower high shown by blue arrows. This is indicating that trend might have turned down so till higher high and higher low is formed the trend would be down. It can also be seen in the chart that nifty is exactly at 200 day EMA ( indicated by blue MA).
Positives for the market: · Nifty is above 200 day EMA
· Daily stochastic oscillator is in oversold position and is about to turn up.
Negatives for the market:
· Weekly MACD is in sell mode indicating weakness in the market and also every rise would be sold into.
· Nifty is below 15 day EMA, 50 day EMA, 100 day EMA
· It has closed above 50 day EMA indicating strength for the bulls.
· Daily and weekly MACD is in sell mode indicating further weakness.
· Weekly stochastic oscillator is in sell mode and is moving down indicating that every rise would be sold into.
Elliott wave analysis:
I have provided two alternative in my previous update a and it appears that the first one has proved right in this I have indicated that we might have see a rise up to 6200 levels and then we might move down and has chances of seeing 5200 levels and exactly as per this nifty has made a high of 6181 and thereafter started to move down and not placed at around 5650 and we have to see whether 5200 is achieved or not.
M.Sri Mahidar
Trend is Friend.
Sunday, January, 16th 16:20 IST
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