Dear Members,

Nifty Video Update

New Short Video explanation of the near term wave counts.

However by the time of this email being sent out. The Sensex and Bank Nifty have broken the previous swing low in favour of a more bearish immediate alternate. This is on the chart below. Wave C down has already started and we may head towards 8400 in this case. Here wave B is a running flat.

https://youtu.be/mIJN5nscvpE

Nifty Medium Term

10 OCTOBER 2016 

The weekly elliott wave commentary with Targets and levels is published every Sunday to Subscribers, This is only an excerpt.

MEDIUM TERM

NIFTY ELLIOTT WAVE UPDATE 

Weekly divergences continue to hold as we test the 20 week average. Nifty has closed up and down alternating each week witout any clear direction even as it has made two lower tops. This week's bar was an inside bar i.e. the high and low was inside last weeks high and low. So we have to get out of last weeks high and low to confirm a trend from here. One divergence works most of the time but a few times since 2009 we have seen multiple divergences while markets were correccting. The dollar and Gold are at inflecction points Find out the key levels to watch in the coming week...  READ MORE

 LONG TERM  

THE LONG & SHORT REPORT :- The LSR is our detailed monthly forecast of where the markets are headed, including sentiment indicators, inter market analysis, wave counts and a global perspective . Report now available TO Indiacharts Subscribers.

Long term Perspective and Basis: Updated 29 AUG 2016

Long term readers know that I have often made a comparison of the Markets with the year 2000 During 2012 when the market tested the 6100 mark again I wrote about the Late Autumn bull market on the lines of Y2K it did not happen then. But more than a year later the market rally that started in 2013 turned out to be just that. With that the two period have many similarities that can be drawn out easily on an simple Arithmetic scale chart of the Sensex So that is what I am doing here First the 9 year period from 1992-2001, remember 1991 is when I started to first track the markets so when I see these two periods I get a sense of Deja Vu because of the business cycle and it's similarities in behaviour and possible outcomes. One look below and keep in mind the time difference in between the subsequent tops and bottoms and that it took 9 years. That 1992-94 was a double top. From the 1993 3 we can draw a rising channel and the Y2K bubble ends with a push just above the upper line. After that the last 18 months bear phase ended the business cycle and a new bull market resumed. 

That brings me to 2008-2017 another 9 year time period with a double top between 2008-2010. A rising channel from the 2009 low that was touched on top during the 2015 breakout rally. Yes this channel is steeper upwards than the one in 2000 but it is similar in the sense that both the bubbles involved a very narrow list of stocks that were the drivers of the move. Back then it was Tech but in a speculative sense the ICE stocks. This time it was Exporters too but included Textiles Tech and Auto ancillaries. Defensive FMCG/Phrama did well in both phases. Both ended in high valuations and the last phase was an 18 month bear market amidst BJP rule Well we have BJP. It is just a question of whether you believe that we are from March 2015 in an 18 month bear phase that takes us to October 2016. Based on the Nine year cycle the Business cycle ends in 2017. And how far down? Use your imagination. In 2000 it was back to the 1998 low 3 years later. The 2013 low was 5100 Nifty. Imagination right? But then what is the difference between Imagination and Reality....it is belief and perception. The unwinding of debt has put us into the last phase of this cycle and so it should be for the markets as well. Levels are a matter of individual judgement. Be prepared accordingly. Yes governments can Hyper-inflate and raise the Base level of the market so watch Monetary Policy. So far no sign of that.

The long term wave count and chart that I have maintained is below. It shows that we completed a wave IV triangle between 2008-2013. The Vth wave maybe over and prices have closed below the blue trendline and are kissing it from below now. This 5 wave advance ends a Supercycle degree bull market in India that Started in 1934 or from Independence. This is the final phase of India's Kondratieff Winter cycle that is discussed in detail in the Economic articles under Nifty forecast menu.

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Nifty topped at 8295 in what can be an expanding triangle on weekly charts. Topping at near 61.8% and just below 8336 makes this the final pivot to expect a normal X wave to end. So the trend reversal should be important.

The Big fight

The Big fight in world equities is protecting the lows held since 2010. At the Top looking at a world index [ADR index in this case] on a long term monthly chart from 1998 shows that the top in 2008 formed a H&S pattern whose neckline was a major resistance in 2014. It was also the 66% retracement mark. Now after the fall from there completed 3 waves down it held an important shelf support and has so far rallied in 3 waves up in a channel retracing 50% if wave 3. So it appears appropriately set up for a retest of the shelf support, a break of which would be wave 5 down of this leg and would be a Thumbs down to the greatest Global Monetary Fight, to keep this from happening.

So if the world index is about to collapse you wanted to be invested in everything India that has nothing to do with anything around the world because Indian companies are completely insulated. Right?  

US 30 year T Bonds

US bond yields spiked again and the 30 year bond chart shows a possible leading diagonal in wave A down. So unless we see another jump up in bond yields yields may decline again as bonds rally in wave B up. So far the jump in yields has not caused much panic.

Also sometimes yields have an inverse correlation with equities so rising bond prices can put pressure on US equities. The 10 year Note and Dow Jones are plotted below to show this.

US 10 year T Notes

The US 10 year yields continue to rise today. The trend down for bonds started months ago and we identified it with the 5 wave decline on the daily chart and even before with the A-B-C rise in wave Z of the 10 year Note shown below. For months i tracked the end point to Z. From there on however I was keeping an eye on the 30 year because of the major inter market divergence between the two. The 30 year or the Long bond was at record levels but the 10 year is still below the 2012 top as seen below. After a complex triple zig-zag retracement a new wave down has started for the 10 year. I have tried marking a wave 2 support for both the contracts but prices have fallen lower. 

Now the short term chart of the 10 year shows an extending decline and not a leading like the 30 year. The n10 year indicates that apart from small bounces yields may continue to rise. RSI near 30 can get oversold but would only provide support for a 4th wave bounce.

Dollar Index

The dollar has had a smart rally and in doing so has developed as a 3 wave advance from the May 2016 bottom. Marked as Waves A-B-C, wave B is a triangle. Wave C=A points to around 99. 70.7% retracement is at 98.65 So that is the first level for wave C to end. If it extends further then the upper yellow line is at 100.80. With the RSI already at 75 a few more gyrations should be enough to complete wave C closer to 98.65 near the March high.