Midcap Madness

As I return from my absence from the market, little has changed on the Midcap Madness. A slight variation to the height of wave I and II then V=I was just achieved yesterday morning. 

Overall the rise kissed the 61.8% mark of the fall seen late last year. A slight throwover the rising channel could be a throw over if 61.8% holds as a key resistance.

BSE Finance Index

The BSE Finance index behaves better maybe than the Bank nifty, similarly the Nifty FInance index. This index below has 100 odd stocks and makes it a broad based average. And so the pattern shows an expanding triangle pattern with the top end today at exactly the blue line. It was touch and go as prices sold off from this level. Now it is upto the RBI tomorrow to save the index from what can be a complete reversal of trend from here.

PSU Bank Index

PSU banks have started to weaken after the PSU bank index completed wave C of a counter trend move up. And that too at 50% retracement of the previous decline. Long consolidation phases have marked PSU bank indices, and stocks, but the larger trend remains down. Now it is over due that they break the lows of 2018.

IPO Index

IPO index was created for a reason. It displays Sentiment of retail participation. IPOs are often the hottest market when markets are at a high and everyone wants a piece of the action. many investors find comfort in bidding for an IPO than buying directly in the market. It is not clear why but it is true. IPOs also perform well onlisting during a bull market giving immediate gains and that could be a reason for the interest. So when the IPO index starts to fall, and listing gains are not coming people lose interest in the IPO market. 

Now the IPO index, it formed an ending diagonal into April of 2018 and then started to fall. So the wave II high was made, the Nifty was at an all time high. Now the entire fall in the index is 5 waves down clearly. And all we have done is bounce back in wave B to near the wave IV high. That done the next move should be wave C down to new lows.

BSE IT

Infosys has continued to form an ending diagonal long term but the IT indices are different now. They are a clear 5 waves up from the 2001 lows. In either case this is a 5th wave long term ending a final boom phase for the sector. While this was mostly lead by midcap IT, the Large cap IT went from "Growth" to "Defensive" in their tagging as growth crashed from double digits to lower single digits and margins contract. This is how I have defined long term 5th waves in the Value Wave model Today the recent rally counts as 5 waves up from the Oct low even though the index did not make a new all time high. So wave V of 5 maybe truncated but this recent move is the last wave of a Vth wave and not the earlier one.

BSE Auto

Auto index is in wave 4 and wave 5 did not start earlier but might have now. Wave 4 is marked as w-x-y, where 'w' is an expanded flat and 'y' is a zig zag. Wave 5 down should eventually take us to new lows in the Auto index and the weakness in Auto stocks  in the last two days is indicative of this trend having started.

BSE Metals

Wave Z in the metals index might have already started as the rising dollar is hurting metal prices. But more importantly even though the metals index did not go to the top end of the falling channel, prices faced stiff resistance at the 40 week moving average and sold off from there. So we could be heading back to the lower end of the channel. In fact we would redraw the channel eventually taking into account the lower top in X and then take the parallel line down to the Feb low. Wave Z would be a complex pattern, a zig-zag or double zig-zag, lets see.