BSE Sensex and NSE Nifty thru' 09-02-2008

[B.Sriram,BHS Management Services Pvt.Ltd]

Dear All,

The counts are agreeable and I also think that a Major Third wave Top is formed and as I had been time and again insisting the inevitable fall has happened. I remind you of my earlier comment about  a month and a half ago when EWI suggested that  a new high was anticipated. My excerpts from the letter dated 25-12-2007 are given below cutting out the graphs and retaining only my comments and Tom Denham's comments. Only I think that the bottoming out may not be at 5000 or 4300 but somewhere around 3900-4100.
In the immediate short term I expect a bounce back to 5400-5700 levels and also not exceeding 6060 levels by which time I renew my sell call. Bears will have an excellent field day for the next 15-18-24 months period.

Happy Trading!!

Sriram

Excerpts from My letter dated 25-12-2007

My Comments: I still favour the upside but for the settlement ending on Thursday I still favour 5900-6000. Best of Luck and Happy Trading!!!!


Tom Denham's Comments:

[Beyond Western Europe]

Indian markets were closed on Friday, but the pattern through Thursday invites looking for the current decline of the [India CNX Nifty Index] (Singapore Exchange) to continue. In addition, the 21-day Twiggs Money Flow Index is under its zero line, which indicates distribution. Favor the downside while price is under 6000. Targets range from 5395 to 5075.

Now to Tom's Current week analysis:

BSE Sensex and NSE Nifty thru' 09-02-2008




[Beyond Western Europe]

The [India National Nifty Index] has slipped below its 8-month exponential moving average. This development was a false bearish signal in April 2005, but the record of the Nifty respecting this level in a bull market is so consistent that I have to take it seriously now. In addition, I can count 13 subwaves within wave (3) on the monthly line chart and the completion of 13 waves would make a top likely. If wave (3) has peaked, the decline could easily continue down towards 4364 in wave (4).

[Email of the Day]: Dear Tom, According to me, wave fifth has been completed, and wave A has been formed, and we are presently (6 February) in flat correction wave B. Wave C is due any time. This view is also supported by the comment in the February issue of EWFF that says that emerging market will not be unaffected by recession in U.S. market. I am also enclosing comments, which I have discussed in length in a paper. Hope you will find it useful and advise me if I have labeled it wrongly. Thanks, Govind

My reply: The rebound does not look impulsive, but the Sensex and Nifty often falter as they rebound from significant lows and take some time to regain good form. However, it is possible that the sharp plunge of Indian stocks in January was wave A, and the recent rebound wave B of an ongoing ABC correction. I am adopting this negative view today, but as I will explain with other charts, I am not eager to adopt a bearish stance.

From comparing the price charts of emerging and developed countries, I am confident that there is an emotional tie between them, regardless of the extent of economic ties. Therefore, I agree that emerging markets "will not be unaffected" by a recession in the United States. However, emerging markets sometimes rally impulsively to new highs while developed markets falter. The wave count that fits the United States does not consistently fit India.

Thank you sending me your thoughts on the Supercycle, Cycle, Primary, and Intermediate degree position of the Sensex and Nifty. I stopped offering wave counts above Intermediate degree in 2006, so I cannot offer more feedback to your views than to say that I think the Sensex and Nifty may have completed wave (3). I found several years ago that I do a better job of forecasting tradable moves when I rely primarily on daily and weekly charts and do not try to relate the current trend to multi-decade patterns.




The [S&P CNX Nifty Index (Singapore Exchange)] rebounded from trend channel support in May 2004, June 2006, and January 2008. On numerous occasions since 2004, price rebounded from above trend channel support. This performance is a reason to favor the upside from the January low. In addition, RSI is nearing historic lows, which has been a bullish condition in the past. Finally, trend continuation is a common surprise delivered by third waves, so I am reluctant to rule out the possibility of Indian stocks rallying while the trend channel remains intact.




I have applied three linear regression channels to this daily chart of the [S&P CNX Nifty Index]. Following the guidance of the first down channel, a trader might have stayed bearish until 25 January when price closed above the top of the channel. Then a trader might have stayed bullish until 7 February when price fell sharply through channel support. Now price has defined another down channel and as long as it remains within it, traders might stay bearish. However, this channel is extremely narrow, which raises some questions about how long it might last. Let's look at the 60-minute chart next for perspective.




The 60-minute chart of the [S&P CNX Nifty Index] reveals five waves down from 4 February. This development suggests that price might rebound soon and any rebound would violate the bearish trend channel. However, even with my reluctance to adopt a bearish stance, I would not take a rebound seriously unless it could sustain a rise above about 5400.




The daily chart of the [India Sensex Index] highlights the potential that wave A down ended at 15,332, that wave B retraced almost a Fibonacci 61.8 percent of the fall, and that wave C is now in progress towards a new low under 15,332. Watch for resistance near 18,269 to keep the trend down.

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Yours  Sincerely,

B. SriRam

Director, Reliable Stocks and Shares(India)Ltd

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