readings carried forward from previous weeks are shown in
can easily identify the new arguments which are written in regular
Last week we discussed,
“Index recovered smartly, entirely the result of oversold
technical position … 4-day rally retraced 88% (Nifty 79%) of
preceding 11-day … the
question is whether rally would be able to retrace the fall in
faster time, for which, 7 days left now … development from
Sep’16 could be more appropriately explained as a Diamond-Shaped
Diametric … the 11-day fall from 26804 (Nifty 8275) to last
week’s low is labeled as ‘g’ or last leg of the Diametric
… if the Index does move
above 26804 (Nifty 8275), and thus generates faster retracement of
the last fall, then it would suggest that a new up-move OR ‘x’
wave has opened … ”
Sensex avoided moving above 26804 (8275) for the first 3 days of
the week, but it did finally manage to move above the level on
Thursday with a gap-up action.
However, after achieving
faster retracement of the fall, it reversed most of Thursday’s
gains on Friday, and finally settled only 133 pts or 0.5%
higher, forming a High Wave type Stalled Bull candle for the week.
While IT proved the only
losing sector, most other sectors settled flat to +ve. The Realty and Metal Indexes, up 5 to 7%, led the gains. The Small
& Mid-cap universe outperformed Sensex.
It was the first time since Sep’16 top
that the Index was able to retrace a falling segment, and that
too, in faster time. So
far, none of the falling segments were fully retraced. We
were looking up to the possibility of such a faster retracement as
a crucial event last week.
As we said, by NEoWave,
faster retracement of 11-day fall in 8 days opens up the
possibility that the downward structure from Sep’16 is over, and
another structure in the opposite direction, i.e. upwards, has
We labeled the fall from Sep’16 high of 29077 (Nifty 8969) as a
7-legged Diamond-Shaped Diametric, as marked on the initial Daily
chart, and targeted it to achieve downside of about 25000-500
This target was based on
60% pattern implication, as per NEoWave, for the preceding Triple
Combination rally from Feb’16 to Sep’16, i.e. “D” leg.
Against our target, Index hit a low of 25718 (Nifty 7894), and we
considered that to be good enough achievement, because it comes
inside 1-3% tolerance allowed
under NEoWave rules.
On one higher degree, the post
Sep’16 fall was marked as “E” leg of the Neutral Triangle
from Mar’15, as shown on the chart above.
We said that “E”
leg of Neutral Triangle usually achieves similarity with its
“A” leg. Such equality projected the possibility that “E” could end in Dec’16 at
Remember, “A” leg
of the Neutral Triangle was from Mar’15 to Jun’15, which
measured about 3700 Sensex points in 3 months.
“E” leg measured about
3400 pts in 3 months (from Sep’16 to Dec’16), and thus
satisfied the requirements of similarity with “A” leg.
As we showed on the
chart above, all corrective
phases in Indian market consumed about 13 or 21 months, both of
which are Fibonacci Numbers.
Dec’16 was the 21st month from Mar’15. Thus, the larger corrective phase may have ended as a Neutral Triangle in 21
Accordingly, we raised the question if the Corrective phase is now
over, and whether a new up-move has indeed opened from Dec’16
bottom. If it is a new
up-move, then Index should move to new all-time highs above
Mar’16 high of 30025 (Nifty 9119).
However, we also mentioned the possibility that the post-Dec’16
move may be only an x-wave after completing 1st
Corrective as Diamond-Shaped Diametric. If
it is only an x-wave, then it should end below 61.8% retracement
level to the 1st Corrective.
The 61.8% retracement
level calculates to about 27800 (Nifty 8560), and the same is
accordingly marked on the initial Daily chart as a crucial upside
for the current up-move. By NEoWave, a small x-wave should not retrace more than 61.8% of the 1st
We will, accordingly, monitor the progress of the current
up-move and see if it hesitates before reaching the 61.8% mark,
and proves itself as x-wave.
If the up-move proves only as an x-wave, then either “E” on
the Neutral Triangle is converting itself into a Complex
Corrective OR larger corrective phase may have started from
Sep’16, as per 8-year cycle, instead of Mar’15.
As can be seen the Intra-day chart of Sensex, the current
9-day rally internally comprises of 3 upward segments of rally of
about 560-660 Sensex pts., and 3 segments of fall of about 250-300
pts each, including the fall on the last day of the week.
If Friday’s fall was similar to last 2 falling segments inside
the current rally, then the question is whether the Index would
now recover like it did after previous two 250-300 pt falling
Note, Friday’s bottom
is also testing the gap-up area of Thursday. So, the question
is whether the Thursday’s gap-up area would prove technical
support as we begin trading for the fresh week.
Accordingly, as the new week begins, Bulls’ immediate
concern is to hold Thursday’s gap-up area at 26723-738 (Nifty
8218-24). Holding the
gap-up could encourage supportive activity.
In the meanwhile, our Daily
Oscillator remains “overbought”. This
can be -ve if the fresh week fails to hold Thursday’s gap-up,
and indeed weakens to close below the gap-up area.
Also note that the A/D
ratio turned -ve on Friday, for the first time in 9 days. If
the Index fails to hold last Thursday’s gap-up area, then we may
not rule out a further correction to the 9-day rally.
We may, however, watch if such a correction remains limited to
only 2-3 days. If it does, then Index can recover again once such
a pause is over. Generally
speaking, despite an overbought oscillator, an up-trend can remain
intact if the pauses do not stretch much beyond 2-3 days.
All in all, whether the Index can hold last Thursday’s
gap-up area or not appears crucial event to watch in the fresh
one can also see on the Daily chart, Index
is now moving closer to its crucial 200-day EMA as well as the 50%
retracement level. These levels, remember, proved as
resistance, twice in the recent past. After last week’s
recovery, the Daily
Oscillator is also close to overbought zone.
the Index does move above 26804 (Nifty 8275), and thus generates
faster retracement of the last fall, then it would suggest that a
new up-move OR “x” wave has opened.
We had shown the Yearly
trajectory for Sensex on the following chart, and said the
lower trajectory line which joins the low of ‘2012 and ‘2013,
was valued at 29000 for the
We also said that
the lower trajectory line would be definitely broken as we begin
trading for the year from this week.
We, however, wondered if this break would lead to disastrous
consequences like it did after breaking lower trajectory line in
‘1995 and ‘2008.
At this point, we are only
raising the technical concerns and not drawing any conclusions.
Neutral Triangle is a
5-legged pattern with an Extended “C” leg. Its “A” and
“E” leg usually tend towards price-time equality. Since
“A” measured about 3750 pts in 3 months, we
projected “E” to end near 25000-500 by Dec’16, to
achieve time-price equality with “A”.
of NT ended on 22nd Sep’16 as a Triple Combination,
for which, the NEoWave pattern implication is about 60 to 70%. The
60% implication also
calculated as 25000-500 (Nifty 7700-7800) as a downside target for
“e” of ET.
of 25718 (Nifty 7916) was close to our downside target of
25000-500 (Nifty 7700-7800). We had set our downside target on 30th Sep, and Index
has fallen within 1-2% tolerance level to the technical target.
Under NEoWave, 3-5%
tolerance can be applied to target levels, both price-wise as well
as time-wise. Therefore, the
question is whether the correction is over, or if it would
continue to actually hit the target area.
of 25000-500 (Nifty 7700-7800) was marked on 30th Sep,
and Trump victory and Govt’s denotification has only helped
Index moved closer to our target.
If the Index fails
to hold the 60-70% pattern implication, then the larger scenario
of 8-year cycle could unfold. As we all know, the year ‘2016 is
on our 8-year cycle. If the Index falls into this spiral, it
usually loses 50-60% from the highs.
We had also pointed
out that the development over the last 3-4 months was looking like
a Head & Shoulders
topping formation, with its Head
at Sep’16 high and Neckline
at Aug’16 lows near 27628 (Nifty 8518).
After Trump Victory
in US, and demonetization of high-value notes by the Govt, Index
dropped nearly 1700 pts (Nifty 540 pts).
NEoWave believes all
chart actions are explained as pattern implication of preceding
pattern. This, accordingly, called for re-arrangement
of our previous structural assumptions, in order to “explain”
or “justify” last Wednesday’s huge fall.
of larger “D” leg rally from Feb’16 onwards has been shifted
backwards to 22nd Sep’16 high of 28872 (Nifty
8893). As a result, the end-point
of 3rd Corrective inside “D” also stands shifted to
the same point.
this point, the 3rd
of “D” stands completed either as 5-legged Extracting Triangle
(as shown on the Daily chart) OR as 7-legged Diamond-Shaped
leg of our ET formed as an Irregular-B C-Failure Flat. As per
C-Failure Flat has larger pattern implication compared to a normal
Flat. The “irregular” nature, or “larger” size of its
lower-degree b, and the failure of c to move above a, together
indicates a larger downward pressure compared to a Normal Flat.
Indeed, as per
implication of Irregular-B C-Failure flat is minimum 161.8%
magnitude of b, to be projected from the end-point of c.
Further, this pattern
implication is to be achieved within the time consumed by such a
As can be seen on
the chart below, lower-degree
b measured 990 pts from 28478 to 27488. A 161.8% ratio of this would be 1602 pts. Reducing 1602 from end-point of c at 28257 would project 26655. This
projection was achieved within the required time, as shown.
“c” leg of ET was a
Zigzag, and its lower-degree b was also an Irregular-B C-Failure
Flat. As shown on the following chart, its pattern implication
was achieved by the fall :
“c” leg measured 2355 pts (Nifty 735 pts) in 12 days. Against
this, “d” measured 1841 pts (Nifty 596 pts) in 1-2 days. As
per “Rule of Similarity & Balance”, 2 waves of the same
degree should be 1/3rd in Price or Time.
“d” was substantially smaller in time compared to “c”,
price-wise it satisfied the above NEoWave Rule. Therefore, fall from last Thursday’s high of 27743 (Nifty 8598) may either be
lower-degree b-leg inside “d” OR “e” leg of the ET/NT.
it is “corrective” phase inside “d”, or “E” of NT,
then the current fall could protect last week’s low of 25902
(Nifty 8002). NT could even see “E” achieving equality with
“A”, at about 26600 (Nifty 8230).
the fall is “e” leg of ET, then “e” should be “larger”
than “c”, as expected inside an “Expanding” Triangle.
leg would turn “larger” than “c” below 25400 (Nifty 7860),
which is a level exactly inside our month-long downside target of
25000-500 we marked on 30th Sep’16.
On one higher
degree, ET forming from
Sep’16 is “E” leg of the larger Neutral Triangle from
had argued that major top
usually consists of broader market losing more than the mainline
Indexes. As can be seen on the following chart, both Small-Cap and Mid-Cap Indexes have lost more than the Sensex, especially
after 4th Nov’16.
even before we opened the
downside structural implications, we saw Index topping out on 8th
Sep’16 exactly at upper of the Blue channel shown on the Daily
chart. As per NEoWave, all Complex Corrective developments get
contained in a channel.
Index broke the 0-x line, we showed in Yellow color, on 26th
Sep. The heavy drop on 29th
Sep, when we ended “D” as per Black labels, broke the lower
end of the Blue channel.
6 consecutive Bull candles on its Monthly chart till ‘Aug, Index
formed a Bear candle for ‘Sep. Remember, 6 consecutive Bull
candle is a record since the year ‘2008, and therefore, it
indicated an “overstretched” situation, especially because the
Nifty PE Ratio had reached “Bubble Territory”.
Major top formation,
usually, comprises of larger damage in the broader market.
per Dow Theory, the lower
top lower bottom formation defines a downtrend, and the
downtrend will be assumed intact until Index can reverse it by
forming higher top higher bottom.
also suspected maturity as the “D” leg as it was a Triple
Combination Corrective and Index was already forming its 3rd
Corrective, which is always the last Corrective
of any Complex development involving x-waves.
We had also argued
that a Triple Combination
carries pattern implication of 60-70% retracement. We also marked the 60% implication at 25000-500 on the initial Daily
chart. On Nifty, 60% retracement level would calculate as 7700-7800.
assumed that Index was
forming a Neutral Triangle since Mar’15 onwards, as shown on the
following chart. If its
“D” leg is over, as described above, its last leg “E”
would go down.
In case of Neutral
Triangle, “E” can tend
towards “equality” with “A” leg from Mar’15 to
Jun’15. If so, then such
equality would also calculate levels projecting 25000-500 (Nifty
Equality of “E”
to “A” could be time-wise as well. Since “A” consumed 3
months from Mar’15 to Jun’15, “E”
could complete by Dec’16, i.e. in 3 months.
also warned of maturity because the Nifty PE Ratio was into a
“Bubble Territory” above 23.50, as was shown on the chart
pattern implication for Triple is 60-70% retracement. So, if
8-monh long “D” leg from Feb’16 (22495/6826) to Sep’16
(29077/8969) is completed, then
Index can drop to at least 25000-500 (Nifty 7700-7800) levels,
which is around 60% retracement level to “D” leg.
Remember, last year
we had used this pattern implication to predict Sensex could come
down to 22500, and this year, Index hit the level exactly.
is the most severe a
pattern. Flat is considered a pattern with lesser severity
compared to Zigzag. However, Triangle
is the least severe of all Corrective patterns.
That is why, under
NEoWave, a Complex
Corrective development, involving x-waves, usually ends with a
Triangle in the last Corrective position.
Inside the larger
development from Feb’16, which we considered as “D” leg, we
marked a “Diamond-Shaped Diametric” in the 1st
Corrective, and a Flat in the “x-wave”. The x-wave finished at
the Brexit low on 24th Jun, and we had opened an upward
2nd Corrective thereafter.
We saw that high
crossed the top of “B” (Jul’15 high of 28578) marginally.
Remember, Nifty had already crossed “B” much earlier on 27th
Jul’15. Now Sensex has also followed.
to this, the A-B-C-D
development from Mar’15 last year is now assumed as a
“Neutral” Triangle, instead of “Running Expanding”
Triangle we assumed earlier.
structurally we had already suspected that the development from
last year’s high of 30025 (Nifty 9119) could be an Expanding or
We, then, opened the
“D” leg of this pattern
from Feb’16, i.e. from our last year’s target level of
22500 (30000 less 25%).
As we explained, if
the Sensex actually moves above the top of “B”, then the
larger structure from Mar’15 could convert from “Running
Expanding Triangle” to “Irregular Expanding Triangle” or
We, remember, have
already marked 5-legged Triangle since Mar’15, and observed that
“C” was 161.8% of
“A”. The current development from Feb’16 onwards was
marked as “D” leg, which is almost 261.8% of “B” leg.
variation of Expanding Triangle could carry implications similar
to “Running” variation for its “E” leg. In both
variations, the downward “e” could achieve 161.8% to 261.8%
ratio with the “A” leg.
However, in both the
variation “E-Failure” cannot be ruled out. Neutral Triangle, however, is a missing variation of Triangle under
Orthodox Wave Theory.
Contracting Triangle is like 1st Extension Impulse, and
Expanding Triangle is like 5th Extension Impulse, then
Neutral Triangle would be likened to 3rd Extension
Triangle, a discovery under NEoWave, is a 5-legged pattern, just
like any other Triangle, but its c-leg is biggest (like 3rd
Extension), and a-leg and e-leg tend towards equality.
by this logic, in case of Neutral Triangle, we could see “E”
(last leg) to be similar to “A” leg.
Remember, “A” leg was
3700-pt down-move from Mar’15 to Jun’15. On Nifty, it was
about 1175 pts. by magnitude.
So, if the “D”
leg ends above “B”, then we could only see a limited downside
similar to “A” leg, as measured above.
In any case, as we
observed, the Nifty PE Ratio is into the “Bubble territory”
above 23.50. As we argued, although it may spend some time in this
territory, it would be wise to remain extremely selective for the
at Sensex and Nifty level, is up 27% from its bottom
at our last year’s projected downside of 22500 (6825).
upside of about 300% on an average was seen in Sugar stocks. Since
these are not normally part of Mutual Fund portfolio, MF holders
may have seen limited or flat returns.
closed Jul’16 at 28052, against 28115 level it close 1 year ago
in Jul’15. Since
MFs’ focus is usually on front-line stocks, NAVs could be flat.
This is just to emphasize that market has been selective and even tricky.
rallied 25-27%, the valuations are very close to Bubble Territory as shown by the
Nifty-50 PE Ratio chart we follow. This, remember, is an
official NSE data. We mostly follow the NSE data in this regard as
BSE data (shown elsewhere in the report) was found technically
any case, last time we used
this chart was during Jan-Mar’15 period, when the PE Ratio had
reached the Bubble territory above 23.50. Sensex shaved off
25% from 30K levels to our target of 22500.
This is not to say that market has peaked already, but it is not
in the safe territory for “investors”. One
should, therefore, chose stocks and sectors more carefully.
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
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.
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 25%.
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
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.
Post-Feb’16 rally looks like a “pull-back” to the broken
line, from where Index is currently reacting lower.
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.
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.
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.
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.
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
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
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.
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
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.
: 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.