Another important aspect is that we are still forming lower lows and lower highs which is not at all bullish. The bear trend is still the major trend and all the rallies can get sold into. The trend still remains down but the weakness of this trend is now evident. Today's price move is important for this pattern to unfold. Have a look at the graph.
USD index which gave strong breakout few days back has seen an important price pattern formation. A bearish engulfing at a major resistance has been formed. A follow up candle may lead to a truncated 5th wave of the Elliot wave pattern that was discussed in the last post. Follow this link
Indian equity markets have seen severe fall in the last few days. Elliott wave analysis shows we are in the smaller degree 'C' wave of the corrective 'B' wave of ABC pattern which is unfolding to take markets back to 3500. I wrote last time that markets may rise to about 3500 to 3700 range before falling again to lows. India markets may see a strong bottom in place in another quarter. This may hold true after markets rise from today's lows taking cues from overseas markets.
There are a number of indicators which show that India markets are decoupling from international markets. The Mutual fund cash ratio is at an all time high and PE is nearly the lowest for a bear market amid other important factors. As and when the liquidity crunch goes away there would be a strong investment inflow into India markets. One of the primary problems of India markets is now resolving meaningfully, i.e. inflation.
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