THE BEGINNING OF THE END

Hi Friends,

Since the beginning of 2012 I had been talking about the forthcoming Crash in U.S. Equities & now  it seems like the so called most awaited Mayhem has Started. Today I'm posting the Real Long term Picture of Dow Jones Industrial Average & thesis behind the so called Crash.

History Of Dow Jones & Super Cycle:-

Source:- http://www.elliottwave.com/

The above chart by EWI shows the Super Cycle of DJIA & History of Presidential Election. So far only 1 Incumbent had been Re-elected during Major Bear Market Rallies in DJIA. Obama is the 2nd Incumbent who is Re-elected. The EWI Research shows that the Incumbent has more chance of getting re-elected during who's Tenure Stock Market Rallied. So Obama's Re-election was an expected outcome. However, the main point here is Investors must not forget the History. Dow History shows that all Major Bear Market Rallies witnessed the Bust in later period.

A Complex Corrective Rally:-

DJIA - Weekly

On a Weekly chart we can clearly see a 5 Wave Decline from 2008 Top which could be marked  as either Wave A or 1. And the 43 months Rally from 2009 lows is a clear Complex Corrective. This Rally doesn't satisfy a single Criteria for Directional Move. The Waves are overlapping & there is no Faster Retracement of 2008 Fall. Hence, the Rally is but obvious Corrective in Nature. We can also see momentum loosing which is evident from Huge RSI Negative Divergence & Decline in Volumes.

Short Term Picture:-

DJIA - Daily

On Daily Chart we can now see a clear Impulsive Fall from Oct High. The Market is oversold & hence a bounce back in wave (iv) is expected. Major support is around 12120 where I expect Wave 1 to complete. The Year End Rally in Corrective Wave 2 up shall be used to Exit Longs.  

Alternatively there could be another (X) & (Z) Waves & DJIA may make a New High. However, Investors must use the Year End Rally to Exit Longs. As much larger Crash is expected in 2013. 

Sentiment Indicator:-

Source:- http://www.elliottwave.com/

The above chart shows the % of Bulls in Market. And as usual the consensus depicts the extreme expression of optimism right at Top. Which has extremely Bearish implications as suggested by the History.

Source:- http://www.elliottwave.com/

The Comparison of CBOE VIX & S&P 500 is another Indicator that seeks attention. The low VIX readings have much Bearish implications on Indices. The mild push in VIX suggest that Investors have not yet Panicked by current fall & thinking this is just a Correction in Ongoing Bull Market. The current picture is reminiscent of what happened in early 2008. The above 2 charts give early warning to Investors of a forthcoming Crash.

Mutual Fund Cash Levels:-

U.S. Mutual Fund Cash Levels vs. S&P 500

The Stock Market needs Cash to Fuel a Rally. The above chart shows Mutual Fund Cash Levels vs. the S&P 500 from 1968. The History shows that Stock Market Rallied when Mutual Fund Cash Levels were at Record Highs & Sold off when Cash Levels were at Record Lows.

Cash levels have been in a range of 3.4% - 3.8% since July 2010 as Stock prices have continued to Rise. This is quite different from prior history and is evidence of the Fed propping up the Market. This cannot continue indefinitely & Market is facing a long decline similar to 2000-2002 and 2007-2009 (40-60%).

In short we must listen to the signals given by Market and don't presume that Government Agencies will Protect our Finances.

Thanks & Regards,

Harsh Dixit.

NIFTY - SETTING BASE FOR YEAR END RALLY

Hi Friends,

NIFTY

In last post I had mentioned about Diwali Rally to 6040. Though Nifty initially broke above the consolidation channel, it could not sustain & fell back sharply. So Nifty is still in 4th Wave which might get over in a day or two.

As suggested by EWT Corrective Waves generally take more time than Motives. Wave 3 Took 20 Days. Hence, Wave 4 shall consume more than 20 Days. Wave 4 has so far consumed 28 Days. And it might consume 1 or 2 days more to complete.

Wave 2 was Running Correction & Wave 4 looks to be a Flat. Wave 2 Retraced up-to 50% which is a Deep Correction. Hence, Wave 4 shall be a Shallow Correction & Retrace up-to 38.2%. A Flat represents a Shallow Correction. More of Time wise Correction than Price. And often witnessed in Wave 4.

Nifty has Strong Rising Channel Support near 5575 & 38.2% Retracement of Wave 3 is at 5585. Hence, Nifty is likely to hold this Support & Ride Higher in 5th Wave to 5944-5976-6040 till Dec last week.

This view will hold true until Channel Support is held. If Channel Breaks I would look for some alternate Count.

Currently I remain Bullish for Year End Rally. This Rally might be the last Run up on Nifty & try to Trap most of the Long Term Investors by heading beyond their Imagination. But Investors must use this Rally to Exit Longs.

Banking, Capital Goods & Metal Sectors will Outperform this Rally. Auto may remain Sideways to Bullish. FMCG & Pharma Sectors seem to have already made a Cycle Top & will give only Corrective Bounce.


So lets wait & watch..


Thanks & regards


Harsh Dixit.

CIPLA - ELLIOTT WAVE UPDATE

Hi Friends,

Today CIPLA touched All Time High 398 after reporting Better than Expected Q2 Earnings. However, I believe this Depicts the stage of Euphoria & marks for the point of Maximum Financial Risk but also Maximum Financial Gain.

CIPLA - Daily

In last post I mentioned about CIPLA Top near 396 in Vth Wave of (c) of Irregular Flat B Wave. Though initially CIPLA dropped till 352 very fast with Current move its clear that Top in Vth might still be pending. There is little shifting of Wave labels. However, main view still remains the same. The view for Irregular Flat B Wave will be Invalidate only in case the stock moves beyond 415.

On a Daily chart we can now clearly see a 5 Wave Rally from Wave (b) low of 286. Today's Candle marks for a Hanging Man which could turn out to be a Bearish Reversal Pattern. We can also see RSI Negative Divergence & Huge Volume with Today's Candle. So Bulls need to be Extremely Careful here.

CIPLA - Hourly

On Hourly Chart we can see that Stock is moving in a Steep Upward Rising Channel. The Trend will remain Up until this Channel is held. However, RSI Negative Divergence Indicates that possible Trend Change on Cards. Stock has achieved both Wave (I=V) target & also Triangle Breakout Target Today. A close below Hourly Trend Channel would Indicate The Short Term Trend Change and Close Below Wave 2-4 line would be initial Indication for a Major Trend Change. Faster Retracement Below 352 will confirm the Huge Drop in Stock.


So lets wait & watch..


Thanks  & Regards,


Harsh Dixit

NIFTY ROCKET MIGHT BE READY FOR MISSION 6040

Hi Friends,

NIFTY - Weekly

In last post I mentioned about 4th Wave Decline on Nifty to 5525. However, after assessing current structure it looks like the Correction in Wave 4 might have already been over at 5583.

NIFTY - Daily

Nifty has been Rallying in a Channel since June 2012 low of 4770 & Trend will Remain Up until this channel holds. On a daily chart we can see a clear 3 Wave decline. Nifty took support at 38.2% Retracement of the September Rally. Hence Wave 4 as discussed might have been over. and Nifty might have started its journey towards 5950-6040 in Wave 5.

NIFTY - Intra Day

On Intra-day chart we can see the Triangle in Wave B which is which is quite common for B Wave. However, it's still not clear whether C is over; as there is no clear evidence for  5 Wave decline n C of Wave 4. Also Rally from 5583 is not clearly identified as Impulse. And it does look like Wave 4 Corrective. So still there is slight chance of Nifty sliding lower in final 5th Wave to complete 20 Days Cycle. Since Wave 3 consumed 20 Days Wave 4 Corrective shall also consume 20 Days. So this decline may fall short and does not go below 5585.

So further Dip if any shall be bought with stop below 5515 to ride the Rocket Rally to 5950-6040. Since this is the 5th wave its Better to keep a Trailing Stop until Nifty reaches 5950-6040 to Enjoy the Rally..

The above view shall hold true until Nifty takes support of Rising Channel. However, if Channel break all Hell will Break Free till 5060. Also since Nifty has already achieved Wave equality in Larger Degree 'C' at 5815 there is possibility of 5th Failure. So we need to be cautiously & not aggressively Bullish here.


Thanks & Regards,

Harsh Dixit.