Infosys - What an Ending!

Infosys - the darling of the tech Mania, has been in a 5th wave since 2003 and I have tried to mark a top on it many times. What manifested into a multi year wedge, now has a 3 wave rise in wave E of the wedge which itself ends in a wedge. The upper pink line of that small wedge was touched last week and prices sold off from there. This is ominous and should be noted as it may mean that the Long term top in Infosys is finally in. The recent high maybe a long term top based on the Long term pattern shown below. If true this high may not be revisited for years to come. I know it does not make sense especially after the strong quarterly guidance given in Dec. But this is a pattern I have been watching for quite some time and it now appears complete. What is amusing is that wave E did not touch the upper trend line. This 5th wave is 13 years in making. The wedge on Monhtly charts has a strong RSI negative divergence as shown. Also volumes throughout the advance have fallen and almost disappeared in the end. Does this end the Labour arbitrage industry? Let time tell.

The first thing to watch in the near term is whether the wedge breaks on the downside. Last year TCS formed a triangle and has broken the lower end already. So Infy and the IT index are just waiting to join the trend. The lower line is at 1100. The bigger long term wedge line is at 925. Each of these breaks will keep confirming the long term view presented above. Even at this level the ending pattern has a clear RSI negative divergence. What happens below 925, first the next major swing low at 547.

Crude Oil needs some new thinking

Off late Crude seems like the only commodity moving up, among the non precious group. So apart from the event for a oil cap I needed a technical level. I made some changes to work on this inverted chart. I have extended the triangle to the 2014 truncated level. [Truncated means that E did not touch the trendline of the triangle. Remember earlier we were marking the point E as wave 2. Crude is approaching the reverse parallel channel for the entire 2015-2016 moves which is at 41$. So 41$ should be a major resistance level. Unless that is crossed with a clear breakout, the next move down should start towards the other end of the channel. The lower end of the channel is at 23$ [this chart is upside down].

Soy Meal [CBT]

Soy Meal - CBT futures, has been bottoming out for a long time. Yesterday the prices just broke out into wave 3 up and formed an inverted head and shoulders bottom.

BSE Midcap

The BSE Midcap index surpassed the 78.6% mark intraday at 10880, and staying above this, it can stretch to the upper trendline from the all time high near 11050 shown below.

NYSE Composite

61.8% is at 10373, one more push to a new high should get the NYSE Composite to that level, and then we will look out for a top.

US 10 year T Notes

Now this will go unnoticed by the market till everyone notices it. The US 10 year T notes touched 61.8% and gave a daily momentum sell signal as shown below. So wave 3 down started. Over the next few weeks this should then signal higher bond yields so we need to watch this closely especially if it moved fast. Small moved in bond markets can be ignored but fast ones rarely are.

Dollar Index

The Dollar index has failed to fall sharply for many days leading to the formation of an ending pattern, after a series of impulsive declines. It is possible that we have just completed a leading diagonal in wave 1 down and the dollar bounces back in wave 2 up. This may also coincide with a dollar rally across EM currencies as they are also oversold with many positive divergences.

The weekly RSI is also near 38 which is a typical support zone.

AUDUSD

Will the falling dollar remain an isolated event or will it draw in all other currencies. While there is no perfect answer there are early signs that other currencies can be drawn in. Most of them have fallen far enough to consider this. The AUDUSD, is one pair, that I can use to show this. I have been following it since 2011 when it started to form a triangle at the top. The entire decline in the AUD is now 3 waves and the question is whether to mark it as 1-2-3-4 OR as shown A-B-C, and complete. At near 66% retracement this is very valid. If it breaks out of the falling channel we will see an up trend unfold that could last months. So it is time to keep watch and consider potential reversals of longer term across pairs now.