Nifty: Daily Price Analysis
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Nifty daily price Analysis 4th June 2010
The global markets are again in tatters. But the prudent trader should not be worried as going by what has spanned out over the weeks, he should have been on the short side of the market. For those who missed the move, there will be ample of opportunities to get in. Hence, there is no need to panic. Over this post, we will just see how the global scenario is playing out. We'll begin by analyzing global indices and then will move towards some broader term market indicators.
Volatility
By now, every trader should have known that if the volatility levels in global markets increase, we are going to witness the same thing. The 'India' story is intact, but more than any story, markets are dominated by sentiments and investor mood. When I looked at the volatility levels in the U.S market, I knew that we could be heading for tough times ahead. Look at the chart below, we are seeing volatility levels spiking up to the levels seen in mid 2008, when we started forming the third wave of the decline. Back then, move was very sharp to the downside. Needs to be seen what happens this time around. But the volatility spike is perhaps indicating good times for option players and is suggestive of the fact that there is some good amount of money to be made in swing trades.
Where's the money flowing?
Now, those who know about intermarket analysis, would know that when the global risk appetite increases, investors tend to move towards certainty. This is where analyzing data for treasury bonds is of vital importance. A look at the data suggests that money is flowing into the treasury bonds as of now. Despite of all the negativity in the U.S economy, mounting deficit numbers, investors are still willing to put away their money in treasury bonds. The chart shows that, 30 year treasury bonds have made a new 12 month high and this suggests the underneath risk prevailing in the market.
Global Indices: Where are they heading ?
In the previous week, I had mentioned that neither of the Indices are in the buy mode. While this is true, there is something even more disturbing which is spanning out. Everyone knows, Europe is in tatters. But technically, Emerging market's are not doing better either. I was having a look at the BRICS countries. Out of the 5 countries, Brazil, Russia, China are in bear phases. Whereas, India and South korea are on the brink of getting into the bear phase. U.S., Dax, Cac, FTSE are already being engulfed in this phase.
When we look at things putting everything together, we get a very gloomy picture. The volatility rising, along with equities not doing well and money flowing into the bond market does not sound good for global markets on the whole. Sometime earlier, I had mentioned that dollar and equities rising together is never ever a good sign and rising dollar along with above mentioned factors are catastrophic for equity markets.
Going forward, as I had posted earlier, we should not be buying anything. Let the markets stabilize, let the nerves settle, then we can enter with full guns blazing. I got out of the markets when they were at 5300+ levels and back then I believed that if I have cash in hand, I will live to fight another day. And this is what I am doing. This market is good for intra day trading and swing trading. For investment, at present, this is a strict no.
Let's see how things go forward. Market's are here to stay and hence don't panic and wait for the right opportunity.
Tc
The global markets are again in tatters. But the prudent trader should not be worried as going by what has spanned out over the weeks, he should have been on the short side of the market. For those who missed the move, there will be ample of opportunities to get in. Hence, there is no need to panic. Over this post, we will just see how the global scenario is playing out. We'll begin by analyzing global indices and then will move towards some broader term market indicators.
Volatility
By now, every trader should have known that if the volatility levels in global markets increase, we are going to witness the same thing. The 'India' story is intact, but more than any story, markets are dominated by sentiments and investor mood. When I looked at the volatility levels in the U.S market, I knew that we could be heading for tough times ahead. Look at the chart below, we are seeing volatility levels spiking up to the levels seen in mid 2008, when we started forming the third wave of the decline. Back then, move was very sharp to the downside. Needs to be seen what happens this time around. But the volatility spike is perhaps indicating good times for option players and is suggestive of the fact that there is some good amount of money to be made in swing trades.
Where's the money flowing?
Now, those who know about intermarket analysis, would know that when the global risk appetite increases, investors tend to move towards certainty. This is where analyzing data for treasury bonds is of vital importance. A look at the data suggests that money is flowing into the treasury bonds as of now. Despite of all the negativity in the U.S economy, mounting deficit numbers, investors are still willing to put away their money in treasury bonds. The chart shows that, 30 year treasury bonds have made a new 12 month high and this suggests the underneath risk prevailing in the market.
Global Indices: Where are they heading ?
In the previous week, I had mentioned that neither of the Indices are in the buy mode. While this is true, there is something even more disturbing which is spanning out. Everyone knows, Europe is in tatters. But technically, Emerging market's are not doing better either. I was having a look at the BRICS countries. Out of the 5 countries, Brazil, Russia, China are in bear phases. Whereas, India and South korea are on the brink of getting into the bear phase. U.S., Dax, Cac, FTSE are already being engulfed in this phase.
When we look at things putting everything together, we get a very gloomy picture. The volatility rising, along with equities not doing well and money flowing into the bond market does not sound good for global markets on the whole. Sometime earlier, I had mentioned that dollar and equities rising together is never ever a good sign and rising dollar along with above mentioned factors are catastrophic for equity markets.
Going forward, as I had posted earlier, we should not be buying anything. Let the markets stabilize, let the nerves settle, then we can enter with full guns blazing. I got out of the markets when they were at 5300+ levels and back then I believed that if I have cash in hand, I will live to fight another day. And this is what I am doing. This market is good for intra day trading and swing trading. For investment, at present, this is a strict no.
Let's see how things go forward. Market's are here to stay and hence don't panic and wait for the right opportunity.
Tc
Good point.
Ideally it should not be. But that applies only in Bull market. What if we are entering a bear market ? In that case it can be. Look at the entire cycle of 2004-2008, wave c went below wave 4 (only marginally). This was because we were in a bear market. Its easy to say now because it has happened, this is why the corrective structure becomes difficult to analyze. Hope you understand.
Tc
Ideally it should not be. But that applies only in Bull market. What if we are entering a bear market ? In that case it can be. Look at the entire cycle of 2004-2008, wave c went below wave 4 (only marginally). This was because we were in a bear market. Its easy to say now because it has happened, this is why the corrective structure becomes difficult to analyze. Hope you understand.
Tc
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Dear, you are right when it comes to text book rules. And am glad your concepts are clear. But here you have to put things into perspective. Mostly Wave 5 lead to extensions and hence they are stretched and are quite pacy, but here what we witnessed was Bull market being neutral and now possibly turning into a bear market. It is here we need to use our logic instead of theory.
What kind of bull market remains largely flat from October - April ? When this type of situation spans out, we need to start putting theory aside and start using some common sense. When I saw that we were relatively flat, I immediately labelled this wave as 5th wave. Now this is not textbook material, but look it is playing out well. If you go back and visit first 10 pages of this thread, somewhere I have labelled this wave 5 immediately when it happened. This is was precisely because of the reasons mentioned above.
In my opinion, don't get too much into Elliot wave. It is good to get broader picture, but that's where you need to stop. We have many other tools which we can use, to earn and learn. And don't forget, we have many simpler tools which can convey the same message of whether market's are bullish/bearish/neutral.
Hope you get my point. And really good work with your concepts. Keep it up.
Tc
http://www.traderji.com/equities/39957-nifty-daily-price-analysis-23.html#post441169
Sir updated the post...please check it once again....few things needed to add
Sir updated the post...please check it once again....few things needed to add
Dear,
Again some very good points by you.
My answer however remains the same. Till the waves get developed it is very difficult to say what comes next. This is precisely why EW cannot generate buy/sell signals with great deal of accuracy. Your reasoning above might be right and I am limited in my capacity to say whether the wave is still progressing or not. It might be or it might not be.
But my common sense does say that we are technically very weak and it is highly unlikely this is a wave 5. I have been proven wrong on so many occasions, and it may be that this is one. But unless it happens, I'll assume we are on the right track. Just look at what I have posted today about global markets.
Hope this helps.
Tc
Again some very good points by you.
My answer however remains the same. Till the waves get developed it is very difficult to say what comes next. This is precisely why EW cannot generate buy/sell signals with great deal of accuracy. Your reasoning above might be right and I am limited in my capacity to say whether the wave is still progressing or not. It might be or it might not be.
But my common sense does say that we are technically very weak and it is highly unlikely this is a wave 5. I have been proven wrong on so many occasions, and it may be that this is one. But unless it happens, I'll assume we are on the right track. Just look at what I have posted today about global markets.
Hope this helps.
Tc
scpindia. - adding to Raunak's view, If wave C (which is still not developed in nifty), then it will not remain as ABC correction, but will become new 5 wave down move.. and then BC wave will get renamed to wave 3 of 5 wave down.
I am infact inclined towards that.. and I don't see this as minor ABC correction, After having nice 5 move up, we might be heading for 5 wave down, ..and 5 th wave of that might end at some fib % of 2250 to 5400 wave...
Let market need to tell us that..
Happy Trading
I am infact inclined towards that.. and I don't see this as minor ABC correction, After having nice 5 move up, we might be heading for 5 wave down, ..and 5 th wave of that might end at some fib % of 2250 to 5400 wave...
Let market need to tell us that..
Happy Trading
This was the same i was trying to figure out....i was getting a mistake in counting the Fifth point. The 3 i was counting as 5 and previous top then 3 as the real 3. Thats where i was mistaken.
Where wave 3 is 161.2% retracement of wave 1 2. And wave 4 is exactly 50% retracement. The last wave which is 5 is 127 % of the wave 3 4.
when learning about the elliot wave i have read, that wave 5 is the most rewarding wave of all the bull waves out of 1 3 and 5. The approximate target of which can be
Total Points from Starting of Wave 1- Wave 3 Top. And adding that Value to the Bottom of point 4. Theoratically. Which happens to be around addition of 2500 points to D. Am i mistaken some where.
And one more point raunak sir. As the wave 3 was in developing mode, one would have got whipsawed, in determining the previous top as 3 and the 3 you actually mentioned as a 5th and last wave...A huge correction after that, as these were actually the formation of 5th wave. Now if that Theory told in book about adding the total point of A-C at D to get the Target of 5th wave is right, then is there any chances that the 5th wave is still under progress.
Enlightem me about this. Its little puzzling. I will post a image on Monthly line chart of nifty. please consider it. It is reverse elliot on the fall at recession time.
Where wave 3 is 161.2% retracement of wave 1 2. And wave 4 is exactly 50% retracement. The last wave which is 5 is 127 % of the wave 3 4.
when learning about the elliot wave i have read, that wave 5 is the most rewarding wave of all the bull waves out of 1 3 and 5. The approximate target of which can be
Total Points from Starting of Wave 1- Wave 3 Top. And adding that Value to the Bottom of point 4. Theoratically. Which happens to be around addition of 2500 points to D. Am i mistaken some where.
And one more point raunak sir. As the wave 3 was in developing mode, one would have got whipsawed, in determining the previous top as 3 and the 3 you actually mentioned as a 5th and last wave...A huge correction after that, as these were actually the formation of 5th wave. Now if that Theory told in book about adding the total point of A-C at D to get the Target of 5th wave is right, then is there any chances that the 5th wave is still under progress.
Enlightem me about this. Its little puzzling. I will post a image on Monthly line chart of nifty. please consider it. It is reverse elliot on the fall at recession time.
Double top is valid scenrio of wave 5 ending at wave 3 top level.
From that perspective, W5 drawn by Raunak is correct place,in my view.
Happy Trading
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