Home > Uncategorized > MARKET NOTES: Sensex may, repeat MAY, see a sharp corrective bear rally

MARKET NOTES: Sensex may, repeat MAY, see a sharp corrective bear rally

MARKET NOTES:  Sensex may, repeat MAY, see a sharp corrective bear rally



Sensex:  The Sensex closed at 17,134 on Friday after having made 4 significant attempts at breaching the floor at 17,000.  While that is not a conclusive reason to anticipate a pullback, the 17,000 by itself is not such a crucial level in the context of long term charts for the Index to spend so much time testing it.  Therefore, there are probable other factors at work here.


The Sensex is still in the grip of the complex correction unfolding from the top of 21080 in November 2010.  From the top of 21080 to the low of 15,135, the Sensex has spent more time correcting downwards than it took from the top in January 2008.  Which is not to say the correction is over but to point out that the Sensex has had enough time to discount all possible bad news.


The long-term trend line, spanning from 2920 in May 2003 was tested in November 2008 and then again in March 2009.  The same trend line was retested in the current correction on 19th December when Sensex hit the low of 15,135.  We are probably going to test this trend line once again before this correction is over.  However, the point in time when this might be tested lies somewhere towards the end of this year and the most likely level at which such a test could happen just happens to be around 17,000.  That to my mind explains why the market is spending so much time testing this critical level.


On the wave count front, we are in a bear rally starting from 15,135 and in terms of time that’s not yet run its course.  All of these factors, combined with the markets reluctance to go below 17,000, indicate a sharp bear rally that could retest 18,500 or even 19,000.


My analysis would be invalidated if 17,000 is breached over the next few trading sessions.  In that case, the market could slide to the afore-mentioned long-term trend line to test it in the region of 16,500.  But after that what?  It would still have to rally from 16,500.  So might as well do it from 17,000!  But yes, the downside exists.  I would give it a 75% probability that we rally from 17,000 rather than 16,500.


See also comments on S&P 500 below the possibility of a new high there.







$-INR:  $ closed at 52.54 on Friday.  Its first target is now 53.5 followed by the previous high of 54.5.  Won’t happen in a week of course but could.  A target beyond 55 is not indicated yet on the charts.  A lot will depend on the swiftness with which an assault on 53.5 is launched.  Expect no corrections save for minor pullbacks.  We are about to enter the parabolic phase.  What follows 54.5 will be very interesting but by then we will be into uncharted territory.



Euro-$:  Euro-$ closed at 1.32520 before making a high of 1.3270 on the same in the current wedge up.  Euro has a significant overhead resistance at just less than 1.33 followed by a tougher cap at 1.34, which is unlikely to be breached in a hurry.  On a breakdown of the rising wedge, which could be any day next week, the Euro will head back to test the floor at 1.30 again.  A lot will depend on what the Euro does around 1.30 this time down.  Not a long term Euro bear unless 1.30 is breached.



$-Index:  $ closed at 78.757 on Friday which itself is minor floor that held up towards the end of February.  If breached, and I am not certain if it will, a more significant floor holds at 76.5.  The wave counts indicate a rally of sorts back to 82 levels in case the floor at 78.5 is not taken out.  The rally if any will be corrective.  Not bearish on the $ in my trading time frame.



Gold:  Gold appears to be screwing up its nerves for a plunge below $1600.  It has some time to create room for the plunge.  In the immediate future, gold could pull up to $1680.  But sooner or later the $1600 level has to give way.  Further market trajectory will become apparent only after that.  Continue to be bearish on gold.



Silver:  Silver is in a reactive pullback after having made a low of $30.  Silver is well below its golden cross and in a long-term decline.  On a breach of the floor at $30 it is likely to head for the next target of $26.  Very dismal chart to read for Silver bulls, if any are left, that is.



Crude Oil:  No comment.




S&P 500:  As indicated in my last blog post, the possibility of S&P 500 to head back to retest the previous high of 1423.73 was always there.  Not sure if it will get there though.  The tend line through points 1074, 1158, 1202 and 1340 should act as a spoiler to the current pull back.  On the oscillator charts the index is in overbought territory.


On the other hand, the index can surprise by making a new high after a short consolidation.  There is room for that on the charts but in my opinion that will be an opportunity to sell, not buy.  Which of the two trajectories the index follows before going for a full correction depends on the technical strength of the bulls vs bears and is difficult to predict.  Investors should ignore the battle and take profits off the table.


Incidentally, the new high hypothesis ties in with the indicated bear rally in the Sensex.  Who is learning from whom in managing markets?!




NB: These notes are just personal musings on the world market trends as a sort of reminder to me on what I thought of them at a particular point in time. They are not predictions and none should rely on them for any investment decisions.











Categories: Uncategorized
  1. April 28, 2012 at 2:23 pm

    I don’t disagree with the Sensex call – we have a descending triangle, but a move to the upside could actually be quite significant – given the time covered within the descending triangle. But, as you rightly point out – no signals to do that yet, particularly since the decline has been through a global rally, and May 7th – the great day of Euro land politics lies ahead. Bears watching.

    But – this is my question. Are you calling for a Sensex rally and a rupee decline simultaneously? If so, what’s that projection based on? History isn’t your friend, on that one.

  2. April 29, 2012 at 7:03 am

    I like your style of writing, clarity and objectivity. But you have too many theories. It will go up, down, little-down-then-up, or big down! It would have been better if you had talked of the highest probable path only, and leave the rest to unfolding reality. 😀

  3. Rohun
    April 29, 2012 at 2:16 pm

    In US May-July period shows weakness for the stocks. Time to slowly get out of market for possible re-entry into Aug. Enjoy summer vacation!

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