10 October 2009

Nifty : End of correction?

For last few days we are witnessing an awkward situation. The global markets have been supportive and yet since October 1 we are seeing Nifty though opening in green close with moderate losses. We have seen it drift lower from 5111 the high made on Oct 1 to 4935 on Oct 9 with a low of 4921 on Oct 6.

The reason for this correction while other markets move up, remains very much technical. The upward push lost momentum, as new buyers are not keen in buying at such high levels. As the market is not going up, we see profit booking by existing position holders. Inevitably a level will come where the "cash on sidelines" (if there is more of it) will start rushing in and along with it the "momentum chasers" and take the Nifty to newer highs.

As per Elliot waves we are currently in wave 4 correction inside a larger wave 3 (see chart). The wave 4 target as per the theory should be a minimum of 4907 and a maximum of 4844, though the caveat being corrections need not necessarily meet the minimum criteria when the undertone is very bullish.

So we can expect the markets to dip slightly more maybe to 4900 mostly by short selling as there are some negative sentiments developing in India (telecom and IT being the main culprits), but that should be the end of it in my opinion as global markets are showing strength. I feel we should see some bounce from here which I assume will be the start of wave 5, which have to take Nifty above 5111 and a minimum of 5165 and in ideal condition to 5310.

We have not seen strong momentum which is usually associated with third waves (larger count) till now, could this be the blow out, which most "analysts" are talking about or we still need to wait it.. only time will tell.

Last word : the above assumptions and predictions are valid till the correction ends above 4744. But deeper the correction, lower the upside targets discussed.


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