Weekly technical analysis highlights Sensex drop to 60% retracement level of 22500 as Triangle 'a' leg

2/21/2016
ICICIdirect.com::Market::TechnicalAnalysis
WeeklyTechnicalAnalysis
15Feb2016
TopStoriesoftheWeek
ByVivekPatil,India'sforemostexpertinElliotWaveAnalysis
Sensextanks6.6%,biggestweeklylosssince10thOct'2008.
VIXshootsup36%fortheweek,currentlyat25.
Sensex/Nifty'sbreakbelow16thMay'2014lowcreatedpanic.
IIPdown1.3%,shrinksforthe2ndmonthinarow.
CorporateNetProfitsdown1.7%,Salesdown4.4%inQ3.
TRAIupholdsnetneutrality,FacebookpullsoutFreeBasics.
2ndxwaveendsbelow24850,Sensextanks7%watchingifholds2250021300
[Technical readings carried forward from previous weeks are shown in italics. Readers can easily
identifythenewargumentswhicharewritteninregularfont]
Lastweekwediscussed,WewerewatchingDoubleBottomsofSepDec15at24800900(Nifty
7500600). However, action turned volatile near this area, and Index could not open our 2nd
target area similar cautious approach would be required in the fresh week as well
Rejection at previous supports, double bottom at 23800900, can be a ve indication
technicallythestructurefrom20thJanlookslikeanExtractingTriangle(ET).Therecoveryfrom
lastWednesdayslowappearstobeitseAstructurewithsmallerralliesandbiggerfalls
isindicatingbullslosingpower.Suchastructurecanhaveveimplicationsifeendsbelow
24850andgetsretracedinfastertime
Sensex failed to cross 24850 level we marked, and reversed violently to retrace the 3day
longelegofrallyinfastertime.Fasterretracementoftherallyconfirmedthat2ndxwaveended
asET,andalegof3rd corrective opened with downside violence. Index, as a result, lost
1631ptsor6.6%lower,comprisingthebiggestweeklynetlosssinceweekended10thOct2008.
Allsectorsendedve.
http://content.icicidirect.com/ULFiles/UploadFile_201621512727.asp
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LastweeksactioncreatedthebiggestWeeklyBearcandleinsidethecorrectionwhichstarted
lastMarch.ThefallacceleratedassoonasIndexbrokethepolitical0point,thelowof16th
May2014,whennewGovtwaselected.
Over a year ago, we showed performance of Sensex post elections on the chart given below. As
shownonthechart,SensexperformancealwaysremainedsubduedafternonCongressGovt
getselected.
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Theequivalent0pointforNiftyandNiftyFuturewereat7131and7160,respectively,andthe
samealsobrokenlastweek.Thebreakcreatedpaniclikesituation.
The Sensex, as a result, broke the Yellow channel we showed on the Daily chart, on the
downside. This suggested Oct2008 like situation when the channel of that time was
similarlybrokenonthedownside.
NSEVolatilityIndexorVIXrose36%fortheweek.ThisIndexisconsideredameasurementof
fearfactorpresentinthemarket.Thisresultedina1600ptornear7%selloffonSensex.
Atthecloseoflastweek,thevalueofVIXwasaround25.Typically,abottomonSensexismade
when VIX touches 3539 area. At Aug13 bottom, VIX was 36. At Aug15 bottom, it had touched
35.50.
The fear was seen gripping the market structurally as a result of extremely weak 2nd x
wave.
Break below the channel also suggests downside violence, seen typically inside a leg of
Triangle. To digest the violence, Triangle requires 4 more legs, and higher bottoms during such
contraction.
Structurally,remember,weconsideredIndexwasformingaTripleCombinationchanneledfall
fromMar15.ItconsistedDiametricpatternsinthe1stand2ndCorrective.ByNEoWave,inaTriple,
the3rdCorrectiveusuallyformsasaTriangle.
The question is whether the Triangle in the 3rd corrective would hold pattern implication for the
precedingTripleCombinationchanneledrally,ornot.
The19monthrallyfromAug13toMar15wasaperfectlychanneledTripleCombination.As
perNEoWave,suchaTriplehaspatternimplicationof60%to70%retracement.
While 60% level calculated to about 22500 (Nifty 6750), the 70% level calculated to about
21250(Nifty6350).Againstthis,Indextouchedalowof22600(Nifty6869)lastweek.
Fridaysactionformedintoa+veHammerlikecandle,asIndexbouncedalmostexactlyfrom
the60%retracementlevelinthe2ndhalfoftheday.
Such a Hammerlike candle can be +ve if Mondays action shows +ve followup sustaining
aboveitsHighof23161(Nifty7035).Counterrallyof23daycannotberuledoutifweindeed
seesuchafollowupsupport.
Strength/close above Friday could generate a pullback move to the broken Yellow
channel.
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WearguedthatthebreakoftheYellowchannelondownsideisanindicationofdownsideviolence
similar to Oct2008, when Index lost 40% in a matter of a month. In Feb16, Sensex has lost
nearly10%sofar.
Lastweek,Sensexlost6.6%,whichisthebiggestWeeklylosssinceOct2008.Thequestionis
whetherIndexwouldkeepfallinglikeitdidduringOct2008,orholdourdownsidetargetarea
of2130022500.
Comingweek,therefore,couldprovideinitialindicationwhethertheIndexwouldindeedhold22500
21300(Nifty64006800)area,orpanicwouldindeedturnintoOct2008likesituation.
Triangle,expectedinsidethe3rdCorrective,wouldbea5leggedpatternwhereinthelowest
valueishitbytheviolentaleg,andrestofthe4legskeepmakinghigherlows,lookinglike
aTriangularbasingpattern.
WemustalsokeepawatchonVIX,stabilityofwhichwouldindicatetheIndexholding21300
22500area.However,failureofVIXtostabilizeatcurrentlevels,anditsfurthershootingupto
3539levels,couldacceleratethepanicfurther.
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Once the rising channel was broken during Mar15, we had calculated its 60% retracement
level,i.e.22500,asourdownsidetarget.
In a Triple, 3rd Corrective could form as a Triangle, the lowerdegree a leg of which could be
extremely violent. So, if the rally proves only a 2nd xwave, then we should get off and re
investatthebottomofsuchalegagain.
Thebroadermarketpanicked.Itappearsinvestorsarethrowingthetowel,andwhentheydo,
itsgenerallyconsideredgoodtimetobuy.
The value of the Baseline of the Yearly trajectory for 2015 was about 22500, as per the
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followingchart.Forthecurrentyearof2016,sincetheYearlyplothasadvancedtotherightside,
thevalueofthelowertrajectorylinefor2016isnowat25500,aswehadmarkedonthechart.
As we argued, anytime the Sensex dips below 25K during 2016, it would break its Yearly
Trajectory.Breakofthetrajectorycouldhaveimplicationsforthecomingyear.Structurally,it
wouldraisethepossibilityofthecurrentcorrectivephasefromMar15stretchingto13months
tillApr16.
As we argued, BowTie Diametric combines contracting triangle in its first half with expanding
triangleinthe2ndhalf,inordertocreatetheBowTieshape.
ib
Earlier,wesuspectedthattheentirefallfromMar15highof30025(Nifty9119)isaComplex
Corrective involving xwave. We suspected this because the fall was enclosed inside a
parallelchannel,whichistypicalofsuchaComplexCorrective.
ComplexCorrective,by NEoWave, involves 2 or more Correctives separated by an xwave. We,
accordingly, marked the 1st Corrective as 7legged DiamondShaped Diametric from 4th
Mar15to15thJun15.
Thexwavedevelopedtill20thAugasa9leggedSymmetricalformation,andretraced1st
Correctivebyexactly61.8%.AsperNEoWave,smallxwavecannotretracemorethan61.8%of
1st.
After20thAug,the2ndCorrectiveopened.Weinitiallysuspected2ndcouldcompleteasaCFailure
FlatifitsCisretracedfaster.ButIndexcouldnotretraceitsCleg,andthereforewemarkedthe
upmovefrom18thNovto2ndDecasDof2nd,andconverted2ndtoaDiametric.
Diametricisa7leggedpatternmarkedasABCDE,anditcanhaveeitherBowTie Shape
ORDiamondShape. As per VPs rules, size of B usually determines how the Diametric
wouldshapeupas.
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If B is small, then the Diametric usually shapes up as Diamond. However, if B is

large,i.e.whenitretracesmorethan61.8ofA,thenitcouldshapeupasaBowTie.
Diametric, remember, combines 2 Triangles. In Diamond shape, it combines Expanding
Triangleinits1sthalfwithContractingTriangleinthe2ndhalf.However,inBowTie shape it
combinesContractingTriangleinthe1sthalfwithExpandingTriangleinthe2ndhalf.
Remember, Sensex was also testing the crucial Monthly Base line we showed on the following
chart,andthesamehasbeenbroken.
In any case, Index has so far not generated faster retracement of its falling segment, which we
requiredforconfirmingthatcorrectivephasefromMar15hasbeencompleted.
Itwillbeonlywhensuchafasterretracementgetsgenerated,andIndexlaterbreaksabove
the channeled Complex Corrective phase we showed on the following chart, that +ve
structuraloptionscanopen.
Priorto2013,thereweretwomajorcorrectivephases,firstduringJan08toMar09andsecond
Nov10toDec11,andbothlastedfor13months,anotherFibonacciNumber.
Based on these historical numbers for major corrective phases timewise, it is possible that if the
current phase stretches beyond Nov15, i.e. 8 months, then it can extend to Apr16, i.e.
continuefor13months.
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Intheprevious13monthlongComplexCorrectivephaseduringNov10toDec11,wehave
seenthe0Xlineworkingasaresistance,ascanbecheckedonthechartabove.
Indeed, we compared the current post Mar15 fall with this 13month fall as both are channeled
ComplexCorrectivesinvolvingxwave.Ascanbeseenonthechartabove,evenaftercrossingthe
0X line after Dec11, Index came down (by 80% of rally) for the higher bottom. We,
accordingly,consider0Xlineascrucial.
Intermsof2yearcycle,wearguedbothSensexandNiftycouldloseabout25%fromitstop
valuation.Shavingoff25%fromtheirrespectivehighof30015/9119,projectedabout22500/
6800.However,toachievetheseprojections,bothIndexesneedtoweakenbelowtheirBase
Lines.
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IntermsofVPsGridLevels,SensexrecoveredbroketheGridlevelof25150.Itisnowtesting
theGridlevelat22700.
TheDollex30chartalsoshowsHead&ShoulderformationsinceMay14,theNecklineofwhich
wasbrokenwithagapdownaction.
TheFII Net Investment figures turned ve since 22nd Apr15 of this year. FIIs sold Rs. 30300
crs.worthofstockssincethatdate,pullingtheSensexdown18%sofarinthisyear.
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LasttimeFIIssoldoutwasduringOct07toMar09,whentheIndexshavedoffasmuchas
63%. FIIs invested Rs.612000 crs after Mar09, but Dollex30 showed unimpressive gains
duringthisperiod,asitisstillbelowits2008highs.
Ever since the new Govt got elected, the DollarRupee equation as gone against FIIs who
investinIndianequityinDollarterms.TheDollarhasappreciatednearly15%fromRs.58.27in
May14toRs.66.92recently.
FallingstockpricesalongwithappreciatingDollarpresentsadoubleedgedriskscenariofor
theFIIs,andtheirexitfromIndianmarketisanaturalresultofthat.
Thequestioniswhetherthiscouldcausea200809likescenario,andifthe8yearcycle,due
in2016,hasarrivedayearearlier.
Latelastyear,weexpectedmarkettohitamajortopduringJanuaryofthisyear,basedon
JanuaryToppingcycle.
As we showed on the following chart, except during 2006, all the major and minor tops on
SensexoccurredinthefirstquarterofeveryCalendarYear,for15yearssince2000.
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Wealsopointedoutthatmarkethasseenmajorcorrectionsorprofitbookingmodesevery2
yearseversince2004.
Except during 2013, when Sensex corrected only 13%, all other corrections saw cuts of
either2535%(likeduring2004,2006and2010)or5060%(likeduring2008).
Thelastmajorprofitbookingwasduring2013,andin2015,2yearcycleofprofitbookingwas
due.
Sofar,inthisyear,theSensexhascorrected25%from30025(Nifty9119)to25119(7626).The
damagesinindividualstocksandsectorsareselectivelymuchlarger.
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Structurally, we suspected a channeled Triple Combination rally was getting over at the
beginningofthisyear,andasperNEoWave,thepatternimplicationforsuchaTripleifabout
6070%.
Remember,theTripleCombinationrallywasfromAug13lowof17449(Nifty5119)toMar15high
of30025(Nifty9119),aswasmarkedonthechartbelow.
The 6070% retracement to this rally calculated to about 22500 (Nifty 6700), and we had
warnedaccordinglyinthebeginningofthisyear.
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As can be seen on the chart above, the 0X line and its parallel line on the opposite side
enclosed the developments, upwards from Aug13 to Mar15, and later downwards from
Mar15onwards.
As per NEoWave, 2nd Corrective should break the lows achieved by the 1st. Break of Jun15
lowswould,accordingly,beanormalthingtohappen.
As per NEoWave, the timesimilarity amidst the legs is symptomatic of Diametric
development. Accordingly, we identified the development from Mar15 to Jun15 as a Diametric,
whichwasofDiamondShapevariety,andpostJun15patternisalsosuspectedtobeaDiametric.
ThepostJun15structureretracedexactly61.8%ofthe1stcorrectivefromMar15toJun15.
We marked postJun15 structure as a small x. As per NEoWave, smallx can retrace
maximum61.8%of1stcorrective.
According to NEoWave, xwave joins two standard correctives inside a Complex
Corrective development. There are 3 types of xwaves depending on how much the xwave
retracestheprecedingcorrective.
A Smallx retraces maximum 61.8%, Commonx retraces about 100%, and Largex
measuresminimum161.8%oftheprecedingcorrective.Therecanbemaximum2xwavesin
anyComplexCorrective.
As per NEoWave, Triple Combination moves are usually wellchanneled, and such moves
carry6070%retracementastheirpatternimplication,whichwouldprojectabout22500(Nifty
6750)asadownsidepossibility.
TheIndexbrokebelowits200dayEMAwithagapdownaction,anditiscurrentlytradingbelowit,
ascanbeseenonthefollowingchart:
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We have been cautioning investors since the beginning of 2015 also because Index had
achievedbreakoutimplicationof5yearAscendingTrianglefrom2008to2013,weshowedon
thefollowingchart.
The largest leg of the Ascending Triangle was the fall of 200809, i.e. about 13000 Sensex
points.AsperNEoWave,thenormalthrustimplicationoutofaTriangleis100%ofthelargest
legoftheTriangle.
From Aug13, when the Ascending Triangle got over, Sensex has moved up almost exactly
13000ptsfrom17449to30025:
TheSensextopat30KlevelswasexactlytheGridlevelasperVPsGridLevelsSystem(GLS),
whichwehavebeenusingsincelast5years.
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Itwas also pointed out that Indexlooked overstretched after rallying for 12 quarters, which
wasasituationsimilartomajortopof2008.
Based on Nifty PE Ratio, we warned that market appears to be near Bubble Territory, as
wasshownonthefollowingchart:
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The22500levelisalsoclosetopreviousmajortopsof2008&2010,andisalsothelowest
levelofSensexTrajectorywe showed since beginning of this year. It is also value of the
linejoining2003&2009bottomsonYearlychartofSensex:
The likely Sensex trajectory for the year 2015 could be provided by the channel shown on
theYearlychartabove.
As we saw previously during 1988 to 1994, and again from 2003 to 2007, Sensex bull phase
trajectory is usually contained in 2 parallel lines roughly. Sensex, in the past, maintained its
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trajectoryfor5yearsor7years,beforebreakingit.
The current trajectory began from 2012, and 2015 would be 4th year in this trajectory, which
couldbreakeitherduring2017or2019,ifthepastisanyindication.
Fortheyear2015,thetrajectoryprojects32800ontheupsideand22800onthedownside.
For2016,however,thelowerlineisat25500asmarked.
The current trajectory is at a lower angle (about 30 degrees), as compared to previous 2
trajectories of 198894 and 20032007. The angle of ascent for both was identical at 60 degrees.
ThelowerangleofcurrenttrajectoryhasbeendespiteheavyFIIInflowsandpoliticalchange.
Technicalreadingscarriedforwardfrompreviousweeks
SinceAug13tillJan15,thebiggestfallwasseenonthedayofElectionResults,about1503
pts.
PostDec14,however,biggerdropsarehappening.
ThedisparitybetweenSensexandbroadermarketwasshownonthecomparativechartbelow.
ThebroadermarketoutperformedSensexfromNov13onwards,anditsoutperformancewas
especiallysignificantfrom16thMayonwards,thedayofElectionResults,ascanbeseenon
thechart.
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In the meanwhile, investors may keep a tab on the risk factors. Major event like Election
Results, Budget, are now behind us. Hope rally has played out. FIIs selling off is a risk factor,
though,Sofar,thishasnotyetplayedoutonanymeaningfulscale.
AnothersetofriskfactorwouldbeGlobal,likeDowbreakingitsbaselineonitsmonthlychart,
etc.
On one higher degree, we considered postAug13 development to be F leg of a larger
Diametricformationfrom2008onwardsasshownonthechartbelow.
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Thislongterm scenario marking the larger Diametric was published on 6th Feb12. This Diametric
assumption, as was argued, compared well with the 11year Diametric formation previously
seenduring1992to2003.
Asshownonthechartabove,FistheExpandinglegofthe7leggedDiametricfrom2008.In
thepreviousinstanceoftheDiametricduring19922003period,Fleghadhitnewhighsduring
2000.
In other words, F leg of the diametric making new highs is nothing new. After hitting new
highsduring2000,Glegwentdowntill2003.
We argued for a Diametric development from 2008 onwards because we observed timesimilarity
withinitslegs,whichissymptomaticofsuchapattern.Sofar,mostofthelegs,exceptBandD,
haveconsumedexactlyabout13months.
OnthemonthlyCloseonlychartgivenbelow,onecanseeSensexcrossingprevioushighs,
indeedtakingtheirsupportforreachingfurthernewerhighsfortheFleg:
WemaywatchifSensexshowsmaturitysignsatcurrentlevelsandstartscracking.
We considered this alternate scenario when Sensex moved above 200810 highs. It shows
correctivephasefrom2008completingasa5leggedAscendingTriangle.Thisscenariocan
openmuchhighertargets,30000+forSensex.
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The30000+targetisnothingbut100%(+/25%)breakoutimplicationofthelargestlegofthe
Triangle.
According to NEoWave, corrective phase should consume more time than the move it is
correcting.Afterthe56monthrallyfromMay2003toJan2008,Sensexhascorrectedfor67month
fromJan2008toAug13,i.e.alargerperiodasrequiredunderNEoWave.
The following picture should throw some light on the postelection movement on the Sensex
since1980onwards:
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Since1980,majorupmoveswereseenmainlyafterformationofaCongressledgovernment.
Now that a BJPled Government is taking over, and has a clear mandate for development and
governance, well watch if a new era is taking over, wherein previous historical political
parameterswillgetchallenged.
By NEoWave logics, complete and faster retracement of the last upward leg, would confirm
thattheDiametricstructureinsidethe2ndcorrectiveisover.Lookhowfasterretracementof
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the6thrallyonthechartabovesignaledcompletionofthe1stcorrective.
We, however, cannot rule out that a sufficient timecorrection is required after any multifold
rally. As shown below, such time correction can last for as much as 161.8% to 261.8% time
ratiotothemultifoldrally.
Asforthelastmultifoldrallyduring1988to1992,itscorrectionlastedfor262.8%timeratio,
from1992to2003.
Wearguedinfavoroflongtermconsolidationphasebeginning2008becausepriorto2008,
Sensex had multiplied 7 times from its 2003 lows. We argued, such multifold rally could
resultsintoamultiyearconsolidationphase.Insidesuchaphase,evenmovesreachingnew
highsareconsidereditsinternalpart,andnotasbreakouts.
As we noted, after 11fold rally during 1988 to 1992, Sensex consolidated for 11 years till
2003 (261.8% time ratio). Within this consolidation, Sensex corrected as much as 3060%
everytimeitcameclosertoprevioushighsorevenafterhittingnewhighs.
AnidealsuckersrallyusuallyinvolvesmakingaNewHigh.Aswecanbeseenonthechart
below,Sensexmovedhigherthanits1992highsduring1994and1997,butreactedbyover
30%boththetimes.
Laterduring2000,itbroke1992/1994/1997highs,byasmuchas15001600,onlytolose58%
later.Afteraseverecorrectivephaselastingfrom2000to2003,Indexbroke2000highduring
2004by100pts,buteventhenshavedoff30%beforethenextrallycouldtakeplace.
All this happened because the 11year long 19922003 phase was a multiyear corrective
phasecorrectingthepreceding11foldrallyfrom1988to1992.
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Onthesupercycledegree,weareconsideringaTerminaldevelopmentsince2003onwards.
TheTerminalwassuspectedbecauseits1stwavefrom20032008wasalabel3corrective
pattern.(Asagainstanormallabel5Impulsepattern).
The20032008rallywasinternallymarkedasacorrectivepatterncalledaRunningDiametric.
Also,moreimportantly,itisonlyinsideaTerminalthat2ndwavecanbeTriangle.(asagainstthis,
inanormalImpulse,2ndwavecannotdevelopasaTriangle,only4thcan).
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Underthecircumstances,ifourassumedFlegcontinuesbeyond13months,i.e.beyondJul
Augofthisyear,thenwecouldbeforcedtoconsiderthecurrentupmoveasthe3rdofthe
TerminalImpulse,aspertheGreenlabelsshownabove.
The basic NEoWave requirement is that such a corrective phase should consume more time
than the move it is correcting. The 19922003 corrective phase, remember, continued for a
timeratioof261.8%tothepreceding4yearrallyfrom1988to1992.
AsperWaveTheory,acorrectivephaseshapesupas3leggedFlat/Zigzag,5leggedTriangle
or7leggedDiametric(whichbasicallycombines2Triangles).
The question, therefore, is whether the corrective phase ended as a 5legged Triangle in
Aug13,ORitwouldcontinuefor2morelegsandformas7leggedDiametric.
As was shown on the chart below, all the updown legs from Jan13 to Aug13, except b,
consumed exactly 2025 days, and formed into a 7legged Diametric (DiamondShaped
variety).
AsperVPsobservationalrules,allthelegs,exceptb,ofa7leggedDiametrictendtowards
timesimilarity.Indeed,byreverselogic,whenlegsbegintobesimilarintime,thestructureismore
likelytoformasaDiametric.
Similar to the pattern explained above, on one higher degree, we also observed time
similarity from 2008. All the legs, except b, consumed about 13 months since the year
2008.
Thequestion,now,remainsifwecontinuewiththeDiametricassumptionorcompletethepost2008
development as a 5legged Triangle. As we have been explaining, we can open possibility of
endingthephaseasTriangleonlyifweseestrengthcontinuingbeyondJulAugofthisyear.
The market is being moved mainly on a/c of FII buying heavyweights selectively, even as
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manystockshavebeentradingnearpreviouslowsinthebroadermarket.
During8quartersfromOct08toNov10,FIIsinvestedoverRs.215000crsasperSEBIdata.Inthe
current8quarterupmovepostDec11, FIIs invested over Rs.242000 crs. Thus, post Dec11 up
movehassofarremainedsmallerdespitethelargerinvestmentfromFIIs.
AsforDIIs,SEBIdatashowsdivestmentofRs.32400crsduringOct08Nov10,andofRs.43800
crsafterDec11.Thus,theupmoveoflast8quartersremainedsmallerdespitethehigherFII
investment,andlargerdivestmentfromDIIs.
DespitehugeFIIbuyinginthelastfiveyearssince2008,theSensexwasstillcloserto2008
highsofar,despiteNetInvestmentofRs.369901crstillJun13bytheFIIs.
How reliable is the FII Net Investment data coming from SEBI is another question. We
generally see the inflated figure in FII buying matching with DIIs selling figure. However,
aboveobservationismadeassumingthedatafromSEBIiscorrect.
Not related to Wave Labels so much on an immediate basis, VPs 30% Principle shows that
Sensexisatariskof2530%cutevery23years,eversince2004,i.e.inthelast910years.
Inthis period, the 2530% cut was seen from the tops in May2004, May2006, Jan2008 and
Nov10sofar.ThelastbottomwasduringDec11.Sensexhasnowcompleted27monthssince
thenwithouta2530%cut.
Weshouldkeepthe30%principleinthebackofthemind,andactasrequiredwhenthetime
comes.
Appendix:SuperCycledegreeWavescenariosforSensex
For SuperCycleDegree wavescenario, consider following ASA LongTerm Index. This Index has
beencreatedbycombiningaveryoldIndexcompiledbyaBritishadvisor(from'1938to'1945),with
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RBIIndex('1945to'1969),F.EIndex('1969to'1980)andSensex(thereaftertilldate).
Thewavecountpresentedshowsthatthemarketisintothelowerdegree5thoftheSCdegree3rd
or5thwave.
Thedetailedwavecountfrom1984onwardscanbeseenontheMonthlychartgivenbelow.The2
4lineshownontheASAlongtermChart above, and Monthly chart below, would determine if the
post1984ImpulseisaSupercycledegree3rdor5th.
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SuperCycleDegree3rd (or 5th) began since Nov84. Its internal 3rd was an extended leg, which
achievedexactly261.8%ratiotothe1stonlogscale.TheSensexisnowformingthe5thWave,and
thesamecoulddevelopasaTerminal,becauseitslowerdegree1stwave from May03 onwards
developedasaDiametric(whichisacorrectivestructure,ratherthananimpulse).Withinthenon
directional legs, 2nd was exactly 61.8% of 1st valuewise, and 161.8% timewise. The 4th was
38.2%of3rdvaluewise,and261.8%timewise.
Whilethe4thisshownasa3leggedabcFlatonthemonthlychartabove.Alternatively,the4this
shownasa7leggedabcdefgBowTieDiametricontheMonthlychartbelow.Thechartbelow
alsoshows11yearparallelchannelfromApr'1992toMay'2003.Asshown,ifoneprojectsthewidth
ofthischannelonupperside,suchaprojectiongave20000astheminimumtarget.Thisforecast
wasachieved.
.
As mentioned above, the lowerdegree 1st from May2003 to Jan2008 appears to be a BowTie
Diametric, marked as abcdefg. It is called "Diametric" because it combines two Triangular
patterns,oneinitiallyContractinguptothe"d"leg,followedbyanExpandingone.Thecontraction
pointisthe"d"leg,andthelegsoneithersidesofittendtobeequal.Accordingly,"c"and"e"were
equal in "log scale", both showing about 60% gains. Similarly, "g" was equal to "a", both showing
about115%gain.
TheDiametricdevelopmentfrom2003to2008isconsideredtobethe1stwaveoftheImpuse.Due
to the corrective structure in the 1stleg,thehigherdegree5th could be developing as a Terminal.
Since2008,weareintoits2ndwave,whichcouldcontinuetodevelopoveraperiodof78years
beginning2008.
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AsperNEoWave,breakof24lineconfirmsaTerminaldevelopment,andIfthe5thprovestobea
Terminal,theSuperCycledegreelabelof3rdwillhavetochangeto5th,becauseonlya5thofa3rd
cannotbeaTerminal.Onlya5thofthe5thcanbeaTerminal.TheSuperCycleDegreemarkingfor
1stand2ndasshownonASAlongtermchart,wouldthenchangeto3rdand4threspectively.
Disclaimer:Thesenotes/commentshavebeenpreparedsolelytoeducatethosewhoareinterested
intheusefulapplicationofTechnicalAnalysis.Whileduecarehasbeentakeninpreparingthese
notes/comments,noresponsibilitycanbeorisassumedforanyconsequencesresultingoutof
actingonthem.
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Weekly technical analysis highlights Sensex drop to 60% retracement level of 22500 as Triangle 'a' leg

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Weekly technical analysis highlights Sensex drop to 60% retracement level of 22500 as Triangle 'a' leg

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2/21/2016

If B is small, then the Diametric usually shapes up as Diamond. However, if B is

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