09 November 2009

Another Reason for 3900 Nifty!

Not much to write about, as I feel the chart itself is doing a lot of talking. As I have pointed out earlier, the rally that we are witnessing from 4540 can carry itself to 4860 and then 4925, which should end the Wave B and another slide to a minimum of around 4500 should be expected.

The expected fall (Wave C) can be a time taking process, the maximum target of which should be around 3900. What would drive such a large correction (almost 1000 Nifty points) cannot be only profit booking or something very technical like overbought conditions.

In my opinion the reason for the fall would be the reason for its rise, which is The Dollar Factor. The Dollar chart from June shows, that we are at almost the fag end of its downtrend in short term and it can reverse anytime now. For equities and commodities world wide its like unfurling the victory flag, at the apex of a volcano ready to erupt. Crude Oil for example is already forming a topping pattern and Gold on the other hand though is making new highs, looks in a final burst before the collapse.

The counter argument I always hear is that, the Fed is not at all in mood of doing anything to strengthen the Dollar, and which means we will remain in this kind of free money environment for much longer period. That may work for long term outlook, but in short term, where not only sentiment impacts trading but also trading impacts sentiment; I guess we are going to see a 15-20% counter move in Dollar pretty soon.


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