Thursday, August 25, 2011

Nifty - Bear Market Timelines

The RBI policy seems to have indeed turned out to be the last-straw for Nifty. We had seen comfortable down-side breaks of 5400 & 5177. And though it seemed to settle above 4800, it is perhaps not long before it is threatened again.

That brings us back to the Killer C argument [check the alternative (2) on timelines]. One possibility at that stage was that the failure at 6184 in Jan 2011 ended the major B. If this were so, then the major A had taken 15 months and the major B 21 months. So we could expect the C to last about 18 months thus giving us mid-2012 as a timeline. On the price, at 62% of A, the target works out to around 3900. Interestingly, this is just around the major election gap of 2009.

Alternatively if we had concluded the major B at the recent 57xx level in July 2011, the timeline for C shifts to September 2012 with the targets also shifting down by few hundred points.

Do we now rule out the immediate bullish alternative? Not really. I was pleasantly surprised to read the alternative shown by Vivek Patil that the major B may be still on in a five wave triangle (though this is not his preferred alternative). Something like the second chart here...the triangle "B". However, this is looking increasingly remote.

Chances are that major C is already in. It is possible that this C could form part of a LT triangle or fall short of A in a truncated Flat. [Why? Because these two imply somewhat subdued "C" as against a Killer one and so far it seemed to be corrective in the larger degree. It is difficult to see Nifty back to 2008/09 lows after the large inflation, the decent growth and the distressed values in 2008/09. If it does go there, it would imply a major beating down of growth and earnings etc and the India story becoming the biggest bubble of the decade. Seems difficult to swallow at the moment..]. Meanwhile an update on the currrent preferred medium term structure...


Variations are ofcourse possible. Technically since 5200/5400 were the major levels on the downside, they should cap all intermediate rallies. In the meanwhile, as CNBC proclaims the 4800 to be the new 5200, we need to start planning for it eventually!

1 comment:

AAR VEE said...

Wishing a Very Happy and Healthy Diwali along with a Prosperous Year ahead

Enjoy the Festival !!! Take Care