Tuesday, December 09, 2008

Market Mayhem - rally coming!!!!

S&P 500 just crossed the 910 mark and may well close above it in another half an hour as I am writing this. Dow Jones Industrials has completed its inverse head and shoulders pattern and as I wrote earlier, the October lows did hold quite remarkably in nearly all the markets.

. . . . . . We remain in corrective short term abc of down 5 wave impulse ‘C’. The corrective wave ‘a’ and ‘b’ have ended and we entered the wave ‘c’ on Friday. This may take markets up to the 3500 to 3700 . . . . . . . . On a risk reward basis, it would be favorable to go long with a risk level below 2490 for a sharp upward rally . . . . . .

Indian markets have been quite subdued in the last few weeks due to the terror strike and political uncertainty. The latest slew of measures by the government and the RBI are encouraging as market tops and bottoms are ofter formed when some constructive steps are taken to stimulate growth. I have been quite bullish for this 1000 point rally for quite sometime now. But the time this rally is taking is making me a bit skeptical about it. Though the price formations and still not bearish in the current wave pattern, there are enough red flags to warrant attention. Nifty should close this week positively above 2900 for this rally to last and reach 3500. If this doesn't happen we may well form a triangle in the corrective fourth wave which is in progress.

There are some sectors which warrant attention now. In all likelihood real estate sector in India has seen a bottom. When I say this, it doesn't mean that home prices would not correct. It means the real estate sector stocks may well have seen the lows or are very near to the lows.

There are some important levels in Nifty to watch out for. If prices are able to trade above 2900 and post a daily close, there would be a rally to at least 3200. Important support now stands at 2680. 2865 is the short term hurdle for this rally to gain strength. Next upturn should be swift and sharp and should be on high volumes to confirm the personality of wave 3 in wave c of corrective wave 4 of c of ABC. Get out of gold if it closes below $740. Crude oil may have formed a bottom, 'at last', if it doesn't breach $39.6 on even an intraday tick.

December may give some respite to the bulls.

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