Corrective Up Move

This week Nifty made a bottom at 7916 and that bottom held for 4 trading sessions after that. The market will look for cues from the RBI meet.

1. The markets took support at the Bollinger Band. The market is correcting the down move from 8598 to 7916 and one can expect an up move till 8185, 8257 or 8337.



2. The RBI has come out with a  notification saying 100 pc CRR for incremental money kept with it from Sept 16. What this means is right now in the wave of demonetization, the banks were keeping money with the Reserve Bank and getting 6.25 % interest, taking the money from the public at 4 %/ So, the banks were earning 2.25 % as arbitrage money. Now, they would be forced to lend aggressively bring down the lending rates.

3. The RBI policy meet on the 7th of December and the US Fed meeting are the next 2 triggers for the Markets.



4. I expect the correction to be over in December, the demonetization mess also seems to be clearing up.

Every decline is a buying opportunity. 7650-7800 seems to be a good base for the markets.

FIIs continue to Sell

The markets continue their negative bias as the FIIs continued to sell. Thsi week there may be a short technical bounce due to expiry.

1. The markets have a strong support at 8000 which has been tested once. Such supports give way at the third or fourth test of it.

2. The big event of December would be Fed rate hike in US and that may coincide with the bottom formation process.

3. The rise from 6825 to 8967 took 6.5 months so it would be reasonable to expect the correction to consume 3 to 4 month. The top was om 7th of September.

4. In December 2011, there was an important bottom formation in December.

5. The Demonetization ruckus will die in about a months time and the Banking sector would be a major winner.

6. 82580-8350 are the immediate resistances and the supports are at 7950-8000.

7600-8000 will be a major buy zone for the markets for a final burst towards 10000-11000 Nifty which will define the first term of Modi in office.

Short term Pain Long Term Gain

Whichever I look at the charts, short term there may be pain but long term we are in a uptrend.

1. The markets may correct upto 8230, 8125, 8000 or worst case 7896.

2. On the upside 8600 is a firm wall, only on breach of that we can think of new highs.

3. The demonetization will have the banks leading the next way of up move.

4. Donald Trump has already started changing his rhetoric, reality will be different.

Right now, the markets are unstable but in the month of November we may see a major low in place.

The FII outflow happened in August 2013, after that we rallied from 5118 to 9119, same way we should rally after the dust has settled.

Correction should end soon

The markets corrected this week too and if it is only a bull market correction, it should end with a Hillary Clinton win. If Trump win it means we are in an extended bear market.

There are 2 charts which suggest a bounce may be coming.

1. Trendline chart

2. RSI chart is very near its support levels.

Also EW, 1st fall was 8968 to 8556 = 412 points this fall 8807 to 8400 equal to 407 points,

If Trump wins we may hit 8200.