Budget to provide further triggers

The markets corrected near settlement and that leaves us with several interesting possibilities.

1. Nifty corrected from 8598 to 7893 and we are merely retracing this up move before we head down.

2. We are retracing the entire down move from 8968 to 7893 before heading down.

3. We are in a fresh up move for new highs.

Now. possibility 1 gets nullified above 8457. The next probability of 8968 to 7893 has upward targets of 8437 8557 and 8753.

The 3rd possibility comes into the picture only after 8753. Now all these are just numbers how do we make them work for us?

8000 to 8200 zone is the best place to deploy the funds. One can invest say 70 pc of funds and remaining 30 pc can be invested below 7800 or above 8600.

Now, if the correction which began on Thursday has following targets of 8326, 8244, 8177 and 8110. The targets by the time we reach the budget session are  8500-8600 if the correction is short and swift.

Now. for the budget if we look only by numbers, there are 2 possibilites:

1. We are at 8100 8200 by the time budget is here and then rally to 8600
2. We rally till 8600 and then correct post the budget.

In any case 8100-8200 is buying time on the Nifty.

Markets likely to remain sideways with upwards bias till the Budget

The markets continued their upwards march in spite of FII selling. Technically, the markets have retraced the last fall in faster time which means the correction is over for the moment.

1. The midcaps and small caps are going up faster than the large cap, this implies correction on pause for the moment.

2. 8968 to 8002 was A, 8002 to 8598 was B and C is ongoing.

C X is over from 8598 to 7893 and we are retracing this leg which can go up to 8457. Retracement levels are 8162, 8245 and 8328,

Once this up move is over maybe post budget the correction can resume.

3. The FIIs are continuing to sell but the selling is getting absorbed by the DIIs flush with SIP money.

We may have a correction to 8100 which may be the base for a 200-300 point rally.

FIIs continue to Sell

The markets rose this week but the FIIs continued to sell. Amy upmove will remain shortlived till the FIIs do not begin to buy again.

1. The year end NAV dressing took the markets up. FII settlement played a key part in the up move. Now, is the up move just a corrective up move or is it a fresh rise.

2. As per Elliot 50 pc retracement is 7891 and 61 pc is 7650. The previous corrective up move we could have said 1 leg was pending if 7916 was not broken.

3. What seems likely is the corrective up move ended at 8274 and a fresh down move has unfolded and we are correcting the fall from 8274 to 7893.

4. 8250 to 8300 has many resistances and one needs to watch out these levels.

5. Every dip is a buying opportunity.

6. Considering Gold prices, very long term investors can consider buying a bit of Gold in their portfolios.

The New Year has begun and from Monday the picture will be clearer where the markets will go from here. The Budget is 1 month early this time on 1st of Feb so a pre budget rally may soon start.

Modi has given the indications of a populist budget, let us see if it cheers the markets though populism seldom cheers the markets.

Eventually lower level await the Markets

December is turning out to be a listless period for the markets. We are stuck in a trading zone which seems to be getting narrower by the day.

1. 7500-7700 levels seem to be a matter of time. 1 probable wave count is

A 7916-8251
B 8251-8056
C 8056 - 8274

Now the fall from 8274 is very slow, so it could be

A 7916-8251
B a 8251-8056
B b 8056-8074
B c 8274 should end above 8043

This is said to be irregular correction.

C wave can go up till 8337- 8400 and then a final down move of 7500-7700.

Or we can go straight from here to 7500 7700. Either ways we seem to be headed down now or in the New Year.

The strategy remains the same accumulate on declines. The Bollinger Bands are narrowing with range between 8269 and 8069
.
There are no more triggers left for the markets for this year.

The Down move resumes

The markets almost tested the 50 pc retracement of the fall from the top made after Trump election and then the down move seems to have continued.

1. A dip below 8000 will confirm that the downtrend has resumed.

2. A key feature of this down trend has been the non stop selling by the FIIs. The DIIs have stepped n and bought a large quantity else we would have been at 7500.

3. The first half of December will have the RBI policy meet coming up, the US Fed meet and all the action is expected in the first 15 days. I expect the first 15-20 days to be negative and then the markets will pick up.

4. Elliot wise a last leg of fall of 700 to 1000 points is pending. I expect 7500-7600 to hold.

5. The RBI will have to go in for a 25 basis points cut. They are now behind the yield curve that is the rates have fallen below the rates.

6. The auto sector seems to be resilient and  the sales of 4 wheelers have not dropped dramatically as expected.

Every dip is a buying opportunity and one should take advantage of this fall.

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.

Happy Diwali

The correction in the markets seems to be ending. Diwali is here and the markets look to bounce.

1. The Tatas fight has dampened the sentiment. That was 1 of the main reasons markets corrected.
2. The bottom should be in place or 100 200 points away but a rally of 1000 points on the Nifty is due.
3. Clinton seems to be winning and that will have a positive effect on the markets, a Trump  win would lead to a disarray as markets do not like move away from status quo.
4. Diwali sales seem to be good and that is a sign of economic turnaround.
5. Nifty bounced from the support zone of 8550. I think the next move would be post the US elections.Enjoy a safe and happy Diwali.