readings carried forward from previous weeks are shown in
can easily identify the new arguments which are written in regular
week we discussed, “If the Index does protect last week’s low,
we cannot rule out that an
upward g-leg is opening … Friday’s action formed Long
Legged Doji (LLD). LLD can
prove as a turning point … after 7 days of down-trend, the oscillator
on Daily is into ‘oversold’ zone … In the coming week,
due to its oversold nature, we may watch
if contrary trade is possible on +ve side … If the
post-Budget rally is ‘Diamond-Shaped’ Diametric, then g-leg
can achieve new heights for the rally … However, it is possible
that the post-Budget rally may be turning into a 9-legged
Symmetrical Formation, similar to what we saw inside the 1st
x-wave (or ‘B’ wave of ET) … showed lower highs for g &
i legs … ”
Sensex opened gap-up above last Friday’s Long Legged Doji (LLD).
Opening an upward g-leg, as we argued, it was up nearly 600 pts by
However, pruning down some
of the gain on Friday, Index settled only 361 pts or 1% higher,
forming an Inverted Hammer
like candle on its Weekly chart. Bankex led with 2.7% gains,
but Metal Index shaved off 2.2% during the week.
trade above last Friday’s Doji worked out well. Monday’s
gap-up area remained intact by the end of the week. After
initial gains, Index shaved off half the gains on the last
The question for the fresh week would be whether last
Monday’s gap-up area would be protected despite the weakness on
the last day of the week. Technically,
gap-up area can prove as technical support. So, we’ll watch
the same as a crucial downside in the coming week.
reaction came after 4 consecutive Bull candles in the g-leg.
Ever since Jul’15, Index has always reacted after forming 3-4 Bull candles
in a row. So Friday’s reaction is considered normal.
This is based on VP’s Bull-Bear
Regime (BBR) concept, which studies how long (time-wise) and
how far (price-wise), Bull or Bears could control the market.
After a certain price-time is achieved, both turn their positions.
Last week started well with a gap-up Bull candle on Monday,
followed by 3 more Bull candles till Thursday. After stretching to
4 Bull candle, however, Bulls decided to unwind, as they normally
The question is whether the g-leg is complete or its still
forming. For that, we need to watch follow-up to the Inverted
Hammer formation on the Weekly chart last week.
Structurally, remember, we
considered the post-Budget development from 29th
Feb’16 could be either a 7-legged “Diamond-Shaped” Diametric
OR a 9-legged Symmetrical formation.
Formation would require a “higher” top for the g-leg (as
compared to the high of e-leg at 26101), Symmetrical
formation would require a “lower” top to be made by the
Market may be experiencing jitters on account of State election
results coming in on 19th May’16 in the
forthcoming week, and therefore, its trading in a volatile or
indecisive until the results are actually known.
If the g-leg ends at a “lower” top
compared to e-leg, then the rally post-Budget would be considered
as 9-legged Symmetrical,
similar to the pattern we saw 15th Jun’15 to 20th
Aug’15 last year, which we labeled as 1st x-wave
(or B of ET).
As we mentioned, Symmetrical
formation could look like a “Rounding Top” similar to what
happened in the 1st x-wave (or B or ET). Market’s
response to the Election results coming on 19th May
could help clarify the structure.
In the fresh week, accordingly, watch
carefully and take care of volatility expected on this front.
Market has completed 2
years after 16th May’2014, when new Government
was elected. At the end of 2 years, Sensex
is up only by 5.5%. Forthcoming election results of 5 State
Assemblies could provide trigger in the short term.
“visually” the shape still looks like a “Diamond”,
and the rally can still be considered a “diamond-shaped”
Diametric. To further confirm this shape, however, Index should
protect itself from any further damage in the fresh week, and open
an upward g-leg soon enough.
In the coming week, due
to its oversold nature, we may watch if another contrary trade is
possible, but on the +ve side.
the post-Budget rally is indeed a “Diamond-Shaped” Diametric,
then the upward g-leg can completely retrace the f-leg
of fall, and achieve new heights for the rally.
However, since f-leg
turned arithmetically “bigger” than the d-leg, it is possible that the post-Budget rally may be turning into a 9-legged
Symmetrical Formation, similar to what we saw inside the 1st
x-wave (or “B” wave of our alternate Expanding Triangle
one can seen after higher
highs till e-leg, the Symmetrical formation inside 1st
x-wave showed lower highs for g & i legs.
formation, as a result, can look like a “Rounding Top”
similar to what we saw during Jul-Aug’15 last year. The
last leg of this pattern would be i-leg, and the faster
retracement of the last leg would confirm completion of the
If it indeed turns
out to be a Symmetrical Formation, (instead of
“Diamond-Shaped” Diametric), then 3 more legs, g-h-i, are
pending. Thus, Symmetrical formation could stretch the end-point of the rally further.
Symmetrical formation we saw earlier was from 15th
Jun’15 to 20th Aug’15, i.e. it formed over 48
trading sessions. Against this, the
current post-Budget rally has now consumed 48 days.
By our alternate Expanding
Triangle (ET) assumption for the rally, the post-Budget rally
is considered as “D” of ET. The “D”
leg is already “bigger” than “B” leg price-wise. Ideally,
it should be “bigger” time-wise as well.
it indeed turns out to be a Symmetrical formation, then we cannot
rule out the rally would end only after 13th May’16,
after achieving “larger” time as compared to the “B” leg.
If Index does drop
below 25140 (Nifty 7728), and later also weaken below the bottoms
of b-leg and d-leg, at 24523-354 (Nifty 7516-7405), then we’ll
be forced to assume that post-Budget rally is over.
investors missed buying at Sensex 22500, and the first leg of
rally (a-leg) was too quick for them. Above 200-day EMA, they were
sucked into buying.
This usually happens
due to “Theory of
Contrary Opinion”, a simple concept that states that when
majority of investors, especially the ones who failed to pick the
bottom, expect market to go up, it will actually go down.
speaking, the Theory is
based on the idea that majority is usually wrong. We are not
suggesting that one could always go contrary to the majority
opinion, but one should certainly consider that alternative.
From the perspective
of Technical Analysis, market sentiment usually proves an
invaluable tool, especially when it goes against what technical
200-day EMA, we had raised the potential upside to 26K
(7950-8000), closer to the Yellow 0-x line we showed on the Daily
chart. At last week’s
high of 26080 (7978), Index achieved those targets.
considered the 13-month long corrective phase as a channeled
Triple Combination. The first two Correctives were identified
as Diametric patterns. We suspected 3rd Corrective
could form as a Triangle. The
post-Budget rally was marked as b-leg of the 3rd
As we argued, by
NEoWave, the 0-x line can
be broken by the 3rd and last Corrective if it develops
as a Triangle.
the b-leg looks too big compared to the a-leg, we thought of an
alternate structure which considers the 13-month corrective phase
as Expanding Triangle (ET). The post-Budget rally was labeled as
the “D” leg of ET.
If the Sensex sustains even above
the 0-x line, then this alternate structure of Expanding Triangle
could be considered as a valid alternative.
The alternate labels are marked in Purple color on the Daily chart
Corrective phase from last year high of Mar’15 is now into 13th
observe the 2-year cycle of
tops and bottoms on the Monthly chart of Sensex shown below.
Since 1980’s, this cycle shows Index turning every alternate
These two time parameters does not rule out Index eventually opening a
downward “c” of Triangle in the 3rd Corrective OR
“E” of Expanding Triangle, and test the recent bottom at
our last year target level of Sensex 22500.
As can be seen on the chart below, most
of the recent bottoms were confirmed with a higher bottom
formation, which, however, retraced the initial rally from the
bottom by about 60-80%.
before a big rally, remember, Index usually absorbs all the negativity at such a higher bottom.
Maintaining a higher
bottom would justify the Triangle formation we are suspecting
in the 3rd Corrective.
As per the alternate Expanding Triangle (ET) scenario, “E” of ET can fail. But
if it does not, then “E” wave can open disastrous downsides,
as much as 161.8% to 261.8% of the “A” leg.
An ET is a 5-legged
formation, consisting both falling as well as rising legs showing
“Expansion”. As can be checked on the chart, “C”
was exactly 161.8% of “A” “externally”, and 100%
“internally”. Similarly, “D” has now turned “bigger” than “B” leg price-wise as
well as time-wise.
If the ET formation does confirm, then “E” (if it is not a
Failure), can be “bigger” than “C” leg.
We observed that Sensex
was respecting all technical resistances one after the other.
Post-Budget, it rallied from our last year’s downside target of
22500 up to 25K level,
which was the top of our 2nd x-wave. This was our
initial target. Index
paused there for about 2 weeks.
If the initial rally was a-leg, then the pause at 25K
was marked as b-leg. Index rallied again as c-leg. Above 25K, we had targeted
the gap-down area of 7th Jan’16 (at about 25400-500)
as our 1st upside target and 200-day EMA as the 2nd
Index paused at 25400-500 levels, again for 2 weeks.
Indeed, the topping
formation looked like a “Double Top”.
As per VP’s Structural logics, , at a
structure with “smaller” rallies and “bigger” falls is a -ve
structure least until it gradually turns +ve with a
“bigger” rallying segment.
However, once it
starts to retrace the rallying segments fully in faster time, the
upward structure will be assumed as over, and the structure in an
opposite direction would be assumed to have opened.
The 25500 was
the value of the lower line of the Yearly Trajectory we showed on
the following Yearly Log-scale chart of Sensex.
line joins the lows of ‘2012 and ‘2013 on Yearly log-scale
chart. The line, remember, provided support during ‘2014.
The line was broken during
‘2016, and as a result, current up-move could be looked upon only as a “pull-back” to the
broken line. Turning lower from the line could, accordingly,
have long-term -ve implications.
we mentioned that the levels
of 21300-22500 are crucial on downside because it was the NEoWave
“pattern implication” of 60%-70% retracement to the 19-month
Triple Combination rally from Aug’13 to Mar’15, as was
shown on the following chart. Index
did respect the pattern implication and rallied 13%.
Time-wise, we argued that the
current month of Apr’16 is crucial because it’s the 13th
month of corrective phase.
was argued that all
corrective phases so far on Sensex continued for a number of
months closer to a Fibonacci Number. This observation is shown
on the following chart :
This would also mean, if
the correction that started last year does not get over in about
13 months, then it can get stretched to 21 months.
This, however, would also require the change in the structure
we assumed for the 13-month log corrective phase. Currently, we
are assuming it to be a channeled “Triple” with 3 correctives
separated by 2 x-waves.
However, if the
Correction does not get over around Apr’16, and starts
stretching beyond, it could be converting itself into a big
NEoWave “Expanding Triangle”.
The internal structure of Expanding Triangle would be
discussed later if required.
had identified a “Diamond-Shaped Diametric” in the 1st
Corrective, and “Bow-Tie shaped Diametric” in the 2nd.
The 3rd from 8th Feb was considered to be
developing as a Triangle.
We said that
Triangles and Terminals are the exception to virtually all Rules,
situations and conditions. As a corollary, whenever an Important
Rule gets broken, it is likely that a Triangle or Terminal had
something to do with it.
25K, Sensex could test the gap-down area of 7th Jan at
25230-358 (Nifty 7675-7721), and if it sustains even above that,
it could make an attempt at the 200-day EMA at about 25600-700
(Nifty around 7775).
ideally expected 3rd Corrective not to move beyond the
top of 2nd x-wave at 25K (7600). Well it didn’t for 2
weeks. However, the movements are hardly “ideal” in practice.
So let us see, and be practical.
a Triangle, b-leg can be larger than the a-leg, but rest of the
legs should show lesser magnitude in order to maintain
In a “Contracting
Triangle”, the “Directional” legs
should “contract” from a-leg to c-leg and from c-leg to e-leg.
Between “Non-directional” legs, d-leg
should be smaller than b-leg.
provides a difficult and tricky trading environment. So, watch
and position carefully in the next 2 weeks till the RBI speaks out
on 5th of Apr.
Remember, after the
2nd x-wave, we
were suspecting a Triangle to form as the 3rd
corrective inside the 12-month long channeled Complex
Corrective since Mar’15. A triple should ideally end with a
Triangle in its 3 Corrective position.
Further, a Truncated
Zigzag usually found as one of the 5 legs of a Triangle.
Accordingly, we marked the Truncated Zigzag post 2nd
x-wave as “a” leg of the Triangle. By corollary, the
current rally from 22500 post-Budget was marked as “b” leg.
We are considering
the current rally as part of the larger Triangle, and its c-d-e
legs are still pending.
to Budget, Sensex broke the “Political 0-point” and panicked
to test 22600. It, then recovered back to the “0-point”, but
the level provided resistance on 22-23 Feb. Panicking once again,
Index dropped to 22500 on the Budget Day.
of 22500-600 look like a Double Bottom. Under Technical
Analysis, “Double Bottom” can prove as a reversal pattern. Its
height of 1300 points cane be added to the “0-point” to
project 25100-200 as an
upside target based on the Double Bottom pattern.
projection matches with VP Grid level at 25150,
as had shown on the following chart, and therefore appears crucial
from the Grid perspective as well.
week, Index hesitated near the Grid level
strong bounce came exactly from our last year’s target of 22500.
This level was imprinted on the mind of the players, and they
remember, was 60% pattern implication for the 19-month long Triple
Combination rally from 17449 (Aug’13) to 30025 (Mar’15). The
60% calculated to 22479, and Sensex bounced from 22495. We printed
If remaining legs do
maintain higher bottoms, then the
Triangle forming in the 3rd Corrective would also
complete the channeled Triple Combination from Mar’15.
Remember, we argued
Corrective inside a Triple should ideally form as a Triangle. Triple Diametric is another possibility, but we’ll consider it
only if it the current Triangle assumption gets invalidated by
weakness below 22500.
We identified the 1st
Corrective as a Diamond-Shaped Diametric. The 1st x-wave was found to be a 9-legged Symmetrical formation, which retraced
the 1st Corrective exactly by 61.8%.
Corrective was identified as a Bow-Tie-Shaped Diametric, which
ended exactly at the lower end of the Yellow channel and
“political 0-point” (the low of 16th May’2014
when the new Govt was elected).
x-wave was identified as an Extracting Triangle, but its size
remained miniscule as compared to the size of 2nd Corrective, in
terms of price as well as time.
By NEoWave, x-wave
can be so miniscule. Indeed, NEoWave even talks about
“missing-x” wherein you can’t actually see the “x-wave”,
but assume its existence in context of the structure around it.
the smallness of the 2nd
x-wave was explained as the reason why a “violent” fall
occurred in the “a” leg of 3rd Corrective. It
not only broke the “political 0-point” violently, but also the
Yellow channel on “downside”.
“downside” break of the Yellow channel, we raised a question
whether the market is roiling into an Oct’08-like situation,
when the Index collapsed 40% in a matter of one month.
hopes can remain open when eventually the 3rd
Corrective completes as a Triangle and Index starts retracing the
falling segments upwards, in faster time.
could now be under the influence 8-year cycle of losing 50-60%,
and has broken its yearly trajectory since ‘2012 (refer to
relevant chart shown elsewhere in this report).
circumstances, failure to
base out, holding 21300-22500 (Nifty 6350-6750), i.e. the 60-70%
pattern implication area, could result in an Oct’08 like
situation. Budget needs to create a dramatic +ve sentiment to avoid such an
eventuality, else …
a year ago, we showed performance of Sensex post elections on the
chart given below. As shown on the chart, Sensex’ performance always remained subdued after non-Congress Govt
we argued, anytime the
Sensex dips below 25K during ‘2016, it would break its Yearly
Trajectory. Break of
the trajectory could have implications for the coming year.
Structurally, it would raise the possibility
of the current corrective phase from Mar’15 stretching to 13
months till Apr’16.
Sensex was also testing the crucial Monthly Base line we showed on
the following chart, and the same has been broken.
to ‘2013, there were two major corrective phases,
first during Jan’08 to Mar’09 and second Nov’10 to Dec’11,
and both lasted for 13 months, another Fibonacci Number.
on these historical numbers for major corrective phases time-wise,
it is possible that if the
current phase stretches beyond Nov’15, i.e. 8 months, then it
can extend to Apr’16, i.e. continue for 13 months.
the previous 13-month long Complex Corrective phase during
Nov’10 to Dec’11, we have seen the 0-X line working as a
resistance, as can
be checked on the chart above.
Indeed, we compared
the current post Mar’15 fall with this 13-month fall as both are
channeled Complex Correctives involving x-wave. As can be seen on
the chart above, even after
crossing the 0-X line after Dec’11, Index came down (by 80% of
rally) for the higher bottom. We, accordingly, consider
0-X line as crucial.
In terms of 2-year cycle, we argued both Sensex and Nifty could
lose about 25% from its top valuation. Shaving off 25% from their
respective high of 30015 / 9119, projected about 22500 / 6800.
However, to achieve these
projections, both Indexes need to weaken below their Base-Lines.
Dollar terms, Sensex was already below the lows of 16th
May’14 six months
ago, as can be seen on the following Dollex-30 chart. This
Index is 38% lower than its peak during ‘2008, and 30% lower
than its highs of Mar’15.
Dollex-30 chart also shows
Head & Shoulder formation since May’14, the Neckline of
which was broken with a gap-down action.
Net Investment figures turned -ve since 22nd Apr’15
of this year. FIIs sold Rs. 30300
crs. worth of stocks since
that date, pulling the
Sensex down 18% so far in this year.
time FIIs sold out was during Oct’07 to Mar’09, when the Index
shaved off as much as 63%. FIIs invested Rs.612000 crs after
Mar’09, but Dollex-30 showed un-impressive gains during this
period, as it is still below its ‘2008 highs.
Ever since the new Govt got elected, the Dollar-Rupee equation as gone
against FIIs who invest in Indian equity in Dollar terms. The Dollar has appreciated nearly 15% from Rs. 58.27 in May’14 to Rs.
Falling stock prices along with appreciating Dollar presents a
double-edged risk scenario for the FIIs, and their exit from
Indian market is a natural result of that.
The question is whether this could cause a ‘2008-09 like
scenario, and if the 8-year cycle, due in ‘2016, has arrived a
Late last year, we expected market to hit a major top during January of
this year, based on “January-Topping cycle”.
we showed on the following chart, except during ‘2006, all
the major and minor tops on Sensex occurred in the first quarter
of every Calendar Year, for 15 years since ‘2000.
We also pointed out that market has seen major corrections or
profit-booking modes every 2 years ever since ‘2004.
Except during ‘2013, when Sensex corrected only 13%, all other
corrections saw cuts of either 25-35% (like during ‘2004,
‘2006 and ‘2010) or 50-60% (like during ‘2008).
The last major profit-booking was during ‘2013, and in ‘2015, 2-year cycle of profit-booking was due.
So far, in this year, the Sensex has corrected 25%
from 30025 (Nifty 9119) to 25119 (7626). The damages in individual
stocks and sectors are selectively much larger.
Index broke below its 200-day EMA with a gap-down action, and it
is currently trading below it, as can be seen on the following
have been cautioning investors since the beginning of ‘2015
also because Index had
achieved breakout implication of 5-year Ascending Triangle
from ‘2008 to ‘2013, we showed on the following chart.
The largest leg of the Ascending Triangle was the fall of
‘2008-09, i.e. about 13000 Sensex points. As per NEoWave,
the normal thrust implication out of a Triangle is 100% of the largest leg of
From Aug’13, when the Ascending Triangle got over, Sensex has
moved up almost exactly 13000 pts from 17449 to 30025 :
Sensex top at 30K levels
was exactly the Grid level as per VP’s Grid Levels System (GLS),
which we have been using since last 5 years.
was also pointed out that Index
looked “overstretched” after rallying for 12 quarters, which
was a situation similar to major top of ‘2008.
on Nifty PE Ratio, we warned that market appears to be near “Bubble
as was shown on the following chart :
22500 level is also close to previous major tops of ‘2008 &
‘2010, and is also the lowest level of “Sensex Trajectory”
we showed since beginning of this year. It is also value of the
line joining ‘2003 & ‘2009 bottoms
on Yearly chart of Sensex :
likely Sensex trajectory for the year ‘2015 could be provided by
the channel shown on the Yearly chart above.
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 trajectory for 5 years or 7 years, before breaking it.
trajectory began from ‘2012, and ‘2015
would be 4th year in this trajectory, which could break
either during ‘2017 or ‘2019, if the past is any
the year ‘2015, the trajectory projects 32800 on the upside and
22800 on the downside.
‘2016, however, the lower line is at 25500 as marked.
current trajectory is at a
lower angle (about 30 degrees), as compared to previous 2
trajectories of 1988-94 and 2003-2007. The angle of ascent for
both was identical at 60 degrees. The
lower angle of current trajectory has been despite heavy FII
Inflows and political change.
readings carried forward from previous weeks
Aug’13 till Jan’15, the biggest fall was seen on the day of
Election Results, about 1503 pts.
Post Dec’14, however, bigger drops are happening.
disparity between Sensex and broader market was shown on the
comparative chart below.
market outperformed Sensex from Nov’13 onwards, and its
out-performance was especially significant from 16th
May onwards, the day of Election Results, as can be seen on
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, So far, this has not yet
played out on any meaningful scale.
Another set of risk
factor would be Global, like Dow breaking its base-line on its
monthly chart, etc.
one higher degree, we
considered post-Aug’13 development to be F leg of a larger
Diametric formation from ‘2008 onwards as shown on the chart
long-term scenario marking the larger Diametric was published on 6th
Feb’12. This Diametric assumption, as was argued, compared
well with the 11-year Diametric formation previously seen during
‘1992 to ‘2003.
As shown on the
chart above, F is the
“Expanding” leg of the 7-legged Diametric from ‘2008. In
the previous instance of the Diametric during ‘1992-’2003
period, F leg had hit new
highs during ‘2000.
other words, F leg of the diametric making new highs is nothing
new. After hitting new highs during ‘2000, G leg went down till
We argued for a
Diametric development from ‘2008 onwards because we observed
time-similarity within its legs, which is symptomatic of such a
pattern. So far, most of the legs, except B
D, have consumed exactly about 13
On the monthly Close-only chart given below, one can see Sensex
crossing previous highs, indeed taking their support for reaching
further newer highs for the F leg :
may watch if Sensex shows maturity signs at current levels and
considered this alternate scenario when Sensex moved above 2008-10
highs. It shows
corrective phase from ‘2008 completing as a 5-legged Ascending
Triangle. This scenario can open much higher targets, 30000+ for
30000+ target is nothing but 100% (+/- 25%) breakout implication
of the largest leg of the Triangle.
to NEoWave, corrective phase should consume more time than the
move it is correcting. After the 56-month rally from May‘2003 to Jan’2008, Sensex has
corrected for 67 month from Jan’2008 to Aug-13, i.e. a larger
period as required under NEoWave.
following picture should throw some light on the post-election
movement on the Sensex since ‘1980 onwards :
‘1980, major up-moves
were seen mainly after formation of a Congress-led government.
Now that a BJP-led
Government is taking over, and has a clear mandate for development
and governance, we’ll watch
if a new era is taking over, wherein previous historical political
parameters will get challenged.
NEoWave logics, complete
and faster retracement of the last upward leg, would confirm that
the Diametric structure inside the 2nd corrective is
over. Look how faster
retracement of the 6th rally on the chart above
signaled completion of the 1st corrective.
We, however, cannot
rule out that a sufficient
time-correction is required after any multi-fold rally. As
shown below, such time
correction can last for as much as 161.8% to 261.8% time ratio to
the multi-fold rally.
As for the last multi-fold rally during ‘1988 to ‘1992, its
correction lasted for 262.8% time ratio, from ‘1992 to ‘2003.
argued in favor of long term consolidation phase beginning ‘2008
because prior to ‘2008,
Sensex had multiplied 7 times from its ‘2003 lows. We
argued, such multi-fold
rally could results into a multi-year consolidation phase. Inside
such a phase, even moves reaching new highs are considered its
internal part, and not as breakouts.
we noted, after 11-fold rally during ‘1988 to ‘1992, Sensex
consolidated for 11 years till ‘2003 (261.8% time ratio). Within
this consolidation, Sensex corrected as much as 30-60% every time
it came closer to previous highs or even after hitting new highs.
ideal “suckers rally” usually involves making a New High.
As we can be seen on the
chart below, Sensex moved
higher than its ‘1992 highs during ‘1994 and ‘1997, but
reacted by over 30% both the times.
during ‘2000, it broke
1992/1994/1997 highs, by as much as 1500-1600, only to lose 58%
later. After a severe corrective phase lasting from ‘2000 to
‘2003, Index broke
‘2000 high during ‘2004 by 100 pts, but even then shaved off
30% before the next rally could take place.
All this happened because the 11-year long ‘1992-2003 phase was
a multi-year corrective phase correcting the preceding 11-fold
rally from ‘1988 to ‘1992.
the super-cycle degree, we
are considering a “Terminal” development since ‘2003 onwards.
The Terminal was suspected because its 1st wave from 2003-2008
was a label-3 “corrective” pattern. (As against a normal
label-5 Impulse pattern).
rally was internally marked as a corrective pattern called a
more importantly, it is only inside a Terminal that 2nd wave can be Triangle. (as
against this, in a normal Impulse, 2nd wave cannot
develop as a Triangle, only 4th can).
the circumstances, if our
assumed F leg continues beyond 13 months, i.e. beyond Jul-Aug of
this year, then we could be forced to consider the current up-move
as the 3rd of the Terminal Impulse, as per the Green
labels shown above.
basic NEoWave requirement is that such a corrective
phase should consume more time than the move it is correcting.
The ‘1992-2003 corrective
phase, remember, continued for a time-ratio of 261.8% to the
preceding 4-year rally from ‘1988 to ‘1992.
per Wave Theory, a
corrective phase shapes up as 3-legged Flat/Zigzag, 5-legged
Triangle or 7-legged Diametric (which basically combines 2
question, therefore, is whether the corrective phase ended as a
5-legged Triangle in Aug’13, OR it would continue for 2 more
legs and form as 7-legged Diametric.
was shown on the chart below, all the up-down legs from Jan’13 to Aug’13, except “b”, consumed
exactly 20-25 days,
and formed into a 7-legged Diametric (Diamond-Shaped variety).
per VP’s observational rules, all the legs, except “b”, of a
7-legged Diametric tend towards time-similarity.
Indeed, by reverse logic, when legs begin to be similar in time,
the structure is more likely to form as a Diametric.
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.
question, now, remains if we continue with the Diametric
assumption or complete the post-‘2008 development as a 5-legged
Triangle. As we have been explaining, we
can open possibility of ending the phase as Triangle only if we
see strength continuing beyond Jul-Aug of this year.
market is being moved mainly on a/c of FII buying heavyweights
selectively, even as
many stocks have been trading near previous lows in the broader
8 quarters from Oct’08 to Nov’10, FIIs invested over Rs.
215000 crs as per SEBI data. In the current 8-quarter up-move post
Dec’11, FIIs invested over Rs.242000 crs. Thus, post
Dec’11 up-move has so far remained smaller despite the larger
investment from FIIs.
As for DIIs, SEBI
data shows divestment of Rs. 32400 crs during Oct’08-Nov’10,
and of Rs. 43800 crs after Dec’11. Thus, the
up-move of last 8 quarters remained smaller despite the higher FII
investment, and larger divestment from DIIs.
huge FII buying in the last five years since ‘2008, the Sensex
was still closer to ‘2008 high so far,
despite Net Investment of
Rs. 369901 crs till Jun’13 by the FIIs.
reliable is the FII Net Investment data coming from SEBI is
another question. We generally see the inflated figure in FII
buying matching with DII’s selling figure. However, above
observation is made assuming the data from SEBI is correct.
related to Wave Labels so much on an immediate basis, VP’s
30% Principle shows that Sensex is at a risk of 25-30% cut every
2-3 years, ever since ‘2004, i.e. in the last 9-10 years.
this period, the 25-30% cut was seen from the tops in May’2004,
May’2006, Jan’2008 and Nov’10 so far.
The last bottom was during Dec’11. Sensex
has now completed 27 months since then without a 25-30% cut.
should keep the 30%
principle in the back of the mind, and act as required when the
: Super-Cycle-degree Wave-scenarios for Sensex
Super-Cycle-Degree wave-scenario, consider following ASA Long-Term
Index. This Index has been created by combining a very old Index
compiled by a British advisor (from '1938 to '1945), with RBI
Index ('1945 to '1969), F.E Index ('1969 to '1980) and Sensex
(thereafter till date).
wave-count presented shows that the market is into the
lower-degree 5th of the SC-degree 3rd or 5th
detailed wave-count from ‘1984 onwards can be seen on the
Monthly chart given below. The 2-4 line shown on the ASA long-term
Chart above, and Monthly chart below, would determine if the post
‘1984 Impulse is a Super-cycle-degree 3rd or 5th.
3rd (or 5th) began since Nov’84. Its
internal 3rd was an “extended” leg, which achieved
exactly 261.8% ratio to the 1st on log scale. The
Sensex is now forming the 5th Wave, and the same could
develop as a ”Terminal”, because its lower-degree 1st
wave from May’03 onwards developed as a Diametric (which is a
“corrective” structure, rather than an “impulse”). Within
the non-directional legs, 2nd was exactly 61.8% of 1st value-wise,
and 161.8% time-wise. The 4th was 38.2% of 3rd value-wise, and
While the 4th is shown as a 3-legged a-b-c Flat on the monthly
chart above. Alternatively, the 4th is shown as a
7-legged a-b-c-d-e-f-g Bow-Tie Diametric on the Monthly chart
below. The chart below also shows 11-year parallel channel from
Apr'1992 to May'2003. As shown, if one projects the width of this
channel on upper side, such a projection gave 20000 as the
“minimum” target. This forecast was achieved.
mentioned above, the lower-degree 1st from May’2003
to Jan’2008 appears to be a Bow-Tie Diametric, marked as
a-b-c-d-e-f-g. It is called "Diametric" because it
combines two Triangular patterns, one initially “Contracting”
up to the "d" leg, followed by an “Expanding” one. The
contraction point is the "d" leg, and the legs on either
sides of it tend to be equal. Accordingly, "c" and
"e" were equal in "log scale", both showing
about 60% gains. Similarly, "g" was equal to
"a", both showing about 115% gain.
Diametric development from ‘2003 to ‘2008 is considered to be
the 1st wave of the Impuse. Due to the corrective structure in the
1st leg, the higher-degree 5th could be
developing as a Terminal. Since ‘2008, we are into its 2nd wave,
which could continue to develop over a period of 7-8 years
per NEoWave, break of 2-4 line confirms a Terminal development,
and If the 5th proves to be a Terminal, the
Super-Cycle-degree label of 3rd will have to change to
5th, because only a 5th of a 3rd
cannot be a Terminal. Only a 5th of the 5th
can be a Terminal. The Super-Cycle-Degree marking for 1st
and 2nd as shown on ASA long-term chart, would then
change to 3rd and 4th respectively.