Tuesday, March 03, 2009

Market Mayhem - The last breakdown !!

In previous posts I had mentioned the probability that markets were triangulating in the fourth wave of the wave 'c' decline. The S&P CNX Nifty has given a breakdown out of that range and is now set to conquer new lows. The wave 'e' of the triangle ended abruptly at the mentioned level of 2960. See previous post -

Current possibility has been thoroughly highlighted in my internal posts that market is forming a triangle which may take some more time to form. The graph below shows the current count on a one hour graph. It shows that current move is again corrective and in threes. 50 period EMA has kept price capped and the formation of 'e' in the triangle may end at 50 EMA which is currently at 2960

The triangle breakdown gives a measured move target of around 1900 levels. However from a market extension point of view there seems a likely hood that we may form a low at around 2079 - 2034 range.

The current breakdown in the market seems sharp and the index may decline strongly after testing the triangulation and giving us the point of recognition. Take a look at the graph for the current wave structure -

The current downleg in the market is largely driven by the fall in banking stocks. However stock market bottom and reversal are not congruent with a falling financial sector. This means that there is some more time left for India stock markets to reverse. The initial signals of reversal may come from an out performance in the financial sector stocks. Since we have entered the wave '5' of the down leg, there would be a lot of divergence on the momentum oscillator. The weekly structure is still trapped inside the corrective price channel. Take a look -

Indian markets might face strong selling pressure due to intense INR weakness. In the short term expect markets to take support at 2572 and 2490 levels. 2750 to 2770 remains a strong resistance range and would see a lot of selling in the market.

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