The fall in the sensex has not have come as a big surprise given the negativeness in the arena. As reported in the May 26th newsletter, the market lost its footings once the levels of 15800 were cracked. Technically this has opened up a possibility of new formations which we will discuss shortly.
Commentaries cannot stand in isolation and so does fundamentals. The movements of prices are very much dependent on what is fundamentals are shaping up and a good fundamentals cannot alone guarantee a good upswing. It is the cycle of these two forces coming together that often gives valuable indication of direction.
At present for Indian markets the direction seems to be headed south. And if you were to look at some possible formations – deep south. At the same time what is the direction the fundamentals are pulling, at this point in time, it too is pulling south. For a bear this seems to be a perfect storm brewing.
The long term trendline moving from early 2006 has been broken and this has left Sensex is rather odd state. The market is totally lacking the direction and these disoriented movements can easily be judged with now prolonged sideways movements.
The patterns on the charts seem to indicate a huge head and shoulders, and typical of tops, we are not sure if it is confirmed or not!
As shown in the charts the long term trend line has broken and created an head and shoulders, which it has effectively resisted. Hence, by traditional counts we are in an H&S pattern with the target around 11000. There is also another support line, a neckline as it happens to be, around 15000 which is currently providing all the support. Conventionally, A break of 15000 should see the markets heading steeply down the cliff to the target of 9000. The support levels to emerge will be in the range of 14800, 13500 and 12500.
The head and shoulders patterns have a very high strike rate of reaching their targets. Hence, we may see 11000 at some point (!). But they also fail, usually, just before a major launch of bull runs. So, are we on such a cusp of bull run? Hard to say with the psychology and news flow enveloping us at present.
If the fall from 17300 regions takes the form of C wave, then it is possible that we are in 3rd wave within the C. The high momentum that we have seen in this fall is typical of C waves. It is likely we will have sustained range bound trades once we have seen a bottom, possibly heading into a triangle shaped formations.
Commentaries cannot stand in isolation and so does fundamentals. The movements of prices are very much dependent on what is fundamentals are shaping up and a good fundamentals cannot alone guarantee a good upswing. It is the cycle of these two forces coming together that often gives valuable indication of direction.
At present for Indian markets the direction seems to be headed south. And if you were to look at some possible formations – deep south. At the same time what is the direction the fundamentals are pulling, at this point in time, it too is pulling south. For a bear this seems to be a perfect storm brewing.
The long term trendline moving from early 2006 has been broken and this has left Sensex is rather odd state. The market is totally lacking the direction and these disoriented movements can easily be judged with now prolonged sideways movements.
The patterns on the charts seem to indicate a huge head and shoulders, and typical of tops, we are not sure if it is confirmed or not!
As shown in the charts the long term trend line has broken and created an head and shoulders, which it has effectively resisted. Hence, by traditional counts we are in an H&S pattern with the target around 11000. There is also another support line, a neckline as it happens to be, around 15000 which is currently providing all the support. Conventionally, A break of 15000 should see the markets heading steeply down the cliff to the target of 9000. The support levels to emerge will be in the range of 14800, 13500 and 12500.
The head and shoulders patterns have a very high strike rate of reaching their targets. Hence, we may see 11000 at some point (!). But they also fail, usually, just before a major launch of bull runs. So, are we on such a cusp of bull run? Hard to say with the psychology and news flow enveloping us at present.
If the fall from 17300 regions takes the form of C wave, then it is possible that we are in 3rd wave within the C. The high momentum that we have seen in this fall is typical of C waves. It is likely we will have sustained range bound trades once we have seen a bottom, possibly heading into a triangle shaped formations.
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