30 May 2015

Nifty : Make or Break coming soon

As per last blog we got a bounce from 8000 (7997 to be exact). Nifty almost reached 8500 but has lost momentum in the resistance zone of 8450-8600. As per the new chart we see new resistance zone developing around 8500-8600 yet again and until 8600 is crossed the chances of this rally to fail exists. Support exists around 8000 and 7700 on the downside.

In my opinion we should definitely test 8000 again and in most likelihood even test 7700 if 8000 psychological level is breached. But before we do that we should get one sell candle in the region of 8500-8600, as we have got in almost all the last four swing highs recently! Another reason I believe Nifty would test 8000 and below is the fact that we are yet to see a strong positive divergence on the MACD and RSI oscillators.

03 May 2015

Nifty : Dead Cat Bounce Ahead?

While looking at the daily charts after a really long time, apart from a clear Head and Shoulder pattern what you can easily see is strong resistance in the 8500-8600 region while support can be expected around 8000.

I also see some divergence in the oscillators and would be reasonable to expect some rally after such a strong selling. The fact that long term trend is still intact, I expect the current correction to be of zig-zag type. So either the correction has almost ended (which I doubt) or there is at least another leg down; which can only start after a leg up from current level. So after a 1000 point correction, an upward correction of 38% to 50% is expected. Interestingly a 400-500 point does coincide with the Resistance!

10 April 2013

Balenthiran, The 17.6 Year Stock Market Cycle

The profile of a bull market cycle resembles an Elliott Wave sequence, although Balenthiran notes that, in contrast to Elliott Waves, his cycle “has distinct phases of fixed time and direction” and “is not trying to determine by how much the stock market may increase or decrease in that time.” (p. 30) Nonetheless, his bull market cycle has an initial leg up lasting four to five years, a sharp correction lasting one to two years, another rally lasting four to five years, a mild mid-cycle correction, and finally a major bull market top. In his stylized version, the rough 4-5 and 1-2 figures get turned into more exact numbers: 4.4 and 2.2 years.

The bear market cycle is more complex. It starts with a bear market crash lasting approximately two years, is followed by a rally lasting four to five years, a second bear market crash lasting around two years (often, he claims, the lowest low), a two-year bear market rally, a major bear market low (not necessarily the lowest low), a final bear market low, and finally the end of the bear market cycle.

So, what can we expect? The current bear market should end in 2018, with the final low coming this year. This low is “not likely to be lower than that seen in 2009, but ideally below the 2011 high.” (p. 57) This may be a good entry point for the new bull market even though it comes five years before the start of the next long-cycle bull market.

Perhaps this is what all the money sitting on the sidelines is waiting for

12 November 2012

The Eight Scariest Charts For Equity Bulls : From Zero Hedge

The Eight Scariest Charts For Equity Bulls

It would appear Mark Twain's infamous quote that "history does not repeat, but it does rhyme" has never been so apt. The following eight charts suggest the rhythm is getting louder and louder. How is it possible? It's nonsense? Well at the heart of the markets, it is still us humans and our endearing greed, fear, and heuristic biases that drive the flows... trade accordingly.

The current price action in the S&P 500 is eerily similar to the movement leading up to the collapse in 1987... (via Bloomberg)

The Dow is also tracking this move almost perfectly over the last two years...(via Citi)

The next three charts are particularly concerning...
Here is the Dow leading up to the 1987 drop - showing its distance from the 55-week average and the collapse once it crossed... (via Citi)

here is an unnamed stock's price action (percentage change) over the past three years...(via Citi)

and AAPL's price appreciation from the lows in 2009 and its 55-week average...(via Bloomberg)

It's not just 1987... Here is the Dow analog again the 1977-78 period and 1905-1910 period... (via Citi)

and the Dow Transports are playing out a very similar pattern to the 1960s-70s... (via Citi)

And a Bonus Chart - for those who prefer to look at Bond Analogs... Here is the current move in 10Y US Treasury yields overlaid on 1992's movement... spooky no? and somewhat fits with a view of weakness into year-end, downgrade on debt-ceiling and collapse... (via Citi)

Machiavelli accounts for this 'repetitive' oscillation by arguing that virtù (valor and political effectiveness) produces peace, peace brings idleness (ozio), idleness disorder, and disorder rovina (ruin). In turn, from rovina springs order, from order virtù, and from this, glory and good fortune.
Machiavelli, as had the ancient Greek historian Thucydides, saw human nature as remarkably stable - steady enough for the formulation of rules of political behavior. Machiavelli wrote in his Discorsi:
Whoever considers the past and the present will readily observe that all cities and all peoples... ever have been animated by the same desires and the same passions; so that it is easy, by diligent study of the past, to foresee what is likely to happen in the future in any republic, and to apply those remedies that were used by the ancients, or not finding any that were employed by them, to devise new ones from the similarity of events.

“Everything that needs to be said has already been said. But since no one was listening, everything must be said again.” — André Gide
Charts: Citi and Bloomberg (as marked above for clarification - not all charts are sourced from Tom Fitzpatrick of Citi)