Dear Readers,

NIfty Update

A large part of the panic for this move maybe done as RSI dips below 30, by tomorrow most markets would have reacted to Trump. The nifty chart below shows An alternate wave count as the recent fall from point b has become 5 waves. It is 5 waves on all indices except the Nifty that has an overlap at 8551 yesterday evening. However it is a 5 wave overlapping structure and fits wave c down so in this way wave Y down may complete and again we get an X wave retracement of 50-61.8% of the fall in wave Y at 8400 and 8500 respectively.

Euro Stoxx 50 - Just 5

DJ Euro Stoxx 50 completed a 5 wave decline at today's low and rebounded so the implications for European markets is that the 5 wave decline is bearish going forward however we get a retracement of the 5 wave fall back to the wave iv high before turning lower. So the relief rally might not last beyond a retracement over the next few days.

Copper

Copper has moved fast as a bullet, wave C up hit the upper channel line target pushing the RSI to 85 near very overbought so some correction should be sought. Wave C up maybe complete or wave 1 of a new move may complete. The nature of the correction would give us a clear indication of what comes next here. But that was fast.

Nifty Daily

The reversal level is the same as it is near the 20dma and 61.8% of the entire fall from 8968 to 8002. The best case scenario is that we are in an X wave again retracing these losses before the next leg down starts. The panic and rebound was expected and appears much like Brexit, all initial targets achieved, however the fall now appears 5 waves down in the Euro stoxx and in the Small cap index discussed below. Implications of which remain retracement and then lower till proven wrong. The target of 8317 is retained at the weekly lower Bollinger band which is a key support to hold if we are not to break lower. 

If nifty did not breakout of the rising channel and overlap 8551 it would have remained clear for a further decline without a bounce. Now prices have come back into the falling channel territory after the panic crash intraday. The falling trendline at 8500 and yesterdays swing high at 8558 are the immediate resistance levels. The lower channel line is at 8357. A move below 8357 would be a sign of weakness. Till then it would attempt to go higher.

The swing did not change much and at 21 shows a minor positive divergence as it did not decline as much as the index. 

The BSE small cap index is important as it made an ending pattern at the top and fell in 5 waves down. The BSE Midcap index also has a five wave decline. Now remember that Nifty had an ending pattern before Brexit as well but later all was recovered later. Then midcap indices did not confirm the same. This time they too have the same pattern so it should be indicative of lower levels after a retracement is complete. 61.8% is at 12940 and the wave iv high is at 13133.

Bank nifty achieved the Y=W target intraday ad bounced back as well and is close to 61.8% of the entire 2 month decline at 19754. The falling channel line is also close to this level. So a breakout above it would have implications of a move to 19970-20100, near the upper band and 78.6% retracement. 19473 is the 20/40 day averages cluster. A close below both would be bearish again till then the X wave up can test higher levels. Complex pattern, however at today's close the daily momentum crossed over to the buy side so raises the chances of up first then down.

Euro

Yesterday I put out a live chart on the Euro and it went on to show why end of day charts are sometimes the final take to what is going on. Prices did not close above the falling trendline and we have a false breakout or Pinocchio bar [lie nose], so the 3 wave rise into yesterdays high is a-b-c and not i-ii-iii, that said the big picture does not change. The Euro has made several corrective moves and this would be one more in wave E or Z of a complex decline that is the last leg down before the Euro rallies strongly and the Dollar declines in a big way. The lower support line of this chart is at 1.082. So I would not like to see it below that. 

US 10 year T Notes

The market has been so Euphoric about Trumps spending plans that it is all Long inflation. We could see that coming as the Oct Long Short report said ''Welcome to inflation'', but the impact that is missed is rising interest rates and the bond market tanked further in the US further as the risk on trade moved out of bonds. The jump in yields yesterday was ignored but pushed bond prices down into a 5th wave. Last week I considered the 3 wave decline to be A-B-C as RSI was at 30 already, but this break makes it 5 waves and therefore move bearish eventually. Right now though yields should bottom and bounce back soon as RSI is at 24. There is no rule why the wave cannot keep extending so till we go above the wave 4 high there is no clear bottom. But as of now the markets are ignoring higher yields in favor of spending growth in commodities.

Aluminium Mcx

Aluminium - changed to marking Z at the Sep low, now an impulse up has started. Wave iii of 3 to go to 123. Support at 113

USDINR

USDINR has broken its equity correlation in recent months. First the FCNR payments did not matter and now neither did trump. Since its Brexit panic high in wave B we are in wave C down and wave D up refuses to start. The recent low of 66.20 is very close to the 20 month average at 66.07 and rising which has held prices for the last 4 years. So I do not expect too much downside. But waiting for even a move to just 67.50 is been a long wait. But sooner than later we should see a move in wave D up at least to the upper trendline

CRB Index

Is the commodity rally over? As rates rise?

The CRB index does not clearly support that view. Bouncing back from an extremely oversold state the move up so far has only made one wave which even to be bearish would be wave A. The monthly momentum is positive and rising and still not above zero. So there is room for more to happen. The CRB index is just below the 20 month average at 192 and if it is surpassed we can go to the 223 resistance.

A closer look shows a 5 wave advance in wave 1/A which is being retraced in wave 2/B. The decline could end near the multiple bottoms or get deeper that is not clear, but I think it will hold above the 180 mark mostly. Wave 3 or C up next at larger degree would then be a major move. Remember that Oil or Energy is a major component of this index so it has been down because of that despite the recent up move in Copper and base metals. But generally with a lead lag most commodities move in the same direction.