Markets Poised critically - Sector Updates Crude CAD SP

Published: Thu, 05/25/17

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Dear Members,

25 MAY 2017

With expiration today is the worst over for the markets. We saw the first deep correction in Midcaps and we are poised to answer that question soon. Here are some of the updates of the last few days that will help you.

USDINR

USDINR completed a long term A-B-C decline recently and has started to rise impulsively. So far only minor wave i and ii are complete iii up started today and points to 65.50. The support is at 64.30 at the 20dma

usdinr230517

PSU Bank index

The PSU Bank index is at the upper end of its range since 2010. Draw a trendline from the highs and we just about kissed it. My sensex is that wave Z down started as shown. This is the last and final wave down for any corrective phase. And while it does not have to be large and can end at the neckline my sense is that it will extend as shown and end with an ending pattern. The entire recapitalisation of a sector is not possible without major write downs and declines in book values and rise in the equity base. This is just logic that anyone should get. What are you thinking? In any case we look at the sectors investment potential only after wave Z down is complete. Right now the upside is hardly any in my understanding of the trendline resistance.

psu-240517

Realty Index triple top

The Realty stocks index just topped near the trendline of the highs from 2012. What this means is that the entire 2012-2017 pattern is probably a long term triangle and wave B of a larger decline. This rally completed wave e of B within the triangle and from the recent high of 2129 we should head to 609 in wave C down based on C=A. That is a 70% decline for the realty index on this simple equation. So people dreaming about the turnaround in the realty stocks into a bull market need to think what they are smoking unless they are confident that the recent highs can be taken out fundamentally.

realty-240517

S&P

The US Indices of S&P and Dow touched the trendline of the highs forming what looks like a ending diagonal pattern. Prechter says that you should remain open to a top in the US markets even if they can push higher if they do. Steve maintains that this triangle is a wave 4 triangle and one more new high can occur. But in both cases we will start with a dip to the lower trendline to 2366. So given the risk that 2366 may or may not hold you should keep in mind the idea that an ending may already be complete and top in place yesterday night for US markets.

snp250517

US VIX - Volatility index

Does low Volatility matter? Two weeks India VIX reported a very low reading and we did get a broad market correction. But does the lowest reading in history mark a major top in markets. On twitter there was an exchange that IV rises before a top. Yes this has happened many times and could almost be true as gospel. So let us look at the chart below of the US VIX It made a bottom 1993 and rose from there for years. The final top for the markets was in 2000, 7 years later. It bottomed again in 2006 and the final top for the market was 10 months later in 2007 [S&P). Now the trendline of those two lows was kissed this month. Maybe we have a new low or bottom in VIX and volatility only rises from here. 7 years and then 10 months are hardly any time correlations that we can draw as to how long after a bottom in VIX can we get a top in equities. It is true that short term rallies in VIX are associated with short term correction in equities. What is not clear is the long term relationship. All that we should think now is that this is an unusually low reading for the US VIX and a US stock market correction is the least you can expect. What it might mean for the longer term would require a long term analysis of the US equity indices themselves.

vix-250517

USDCAD

I am having to flip flop on some of the currency pairs because the weak dollar trend is a Macro trend. So with the USDCAD failing to go above the 61.8% mark in blue we should consider that wave C down can start. It can fall to 1.31 and if that breaks we are looking at 1.30 and then C=A at 1.17 The big picture may appear like a head and shoulders top with the neckline near 1.30

usdcad250517

Crude

Crude completed a 5 wave rise and is mostly wave a of an advance. Wave b can see it dip to either 48 or 47 near the wave iv low or 61.8% of the entire rise before wave c up unfolds.

crude230517

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Rohit Srivastava
www.indiacharts.com
For accurate market forecasting. Market forecasting is a study of past data to assess
future probable outcomes. It is our endeavor to discuss high probability outcomes for
traders and investors. However this is not a solicitation to buy or sell stocks futures or
options or any security. Trading in any financial market should be done with sound
knowledge and the help of a qualified investment adviser. Stocks based on the Elliott
wave model are based on the Fibonacci fractal of the market and momentum indicators,
targets are based on Fibonacci maths and are only indicative of what the mathematical
model throws up. This is not a recommendation to buy/sell.
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