hi ,all..when i called a top at 20870 on 12-jan-08,i never expected such severe correction to take place..but markets never moove as per our EXPECTATIONS !!!!!..this is an universal truth.a lot of us thought that as everyone expects 12000..market will not come to that level..but i think the speedy communication systems have changed that perception..spread of the great subject is so immence that everyone comes to know the level of supports and resistance in no time..but i think as i EXPECTED in jan -08 itself that we are heading for a 2-3 years of consolidation phase..the range may have changed but till now i stick to the point that THIS FALL IS CORRECTIVE IN NATURE ONLY....the question is that which rise is being corrected ?? the one from sept -01...oct-02 or the one from may 04 ??..few technical points to be discussed..
1)the bearishness as seen in last few days is at the extreme..exactly as bullishness was at its best in jan-o8..so as per rules its a time to call a bottom very much nearby...no one knew in jan-08 that inflation will reach such dizzy heights or oil will threaten to touch 150..or our gdp will have tobe re-rated to slow down as hefty as more than 2% within short span of six months...but MARKET KNEW ALL THESE CHANGES ARE COMING IN MACRO-ECONOMY OF THE COUNTRY..AND TECHNICALLY I CALLED IT A MAJOR TOP....is the reverse going to happen this time?? the answer is yes...how stronger a bottom we will see in the future.but i am sure we are very much near a BOTTOM....as i have been mentioning in all my articles THE MARKET DISCOUNTS THE FUTURE..so these hefty fall in indices is surely worth a fall of 2-3% of GDP..and remember that not a single blue-chip company listed in nse or bse has stopped working !!..its only that EXTREME GRID which was reflected in zooming and unrealistic prices has been CORRECTED..and now is the time to correct the prices which are too much below FUTURE FUNDAMENTALGROWTH because of EXTREME FEAR....
2)THE ROC AND MACD on weekly charts have shown a clear positive divergance in highly oversold zone.. which will help the bear onslaught.
3)if you see the weekly charts of sensex and nifty it is very much clearly evident that the whole fall has come in three segments UNTILL NOW..AND as the fall is nearing some major supports mentioned as under i think that the fall is CORRECTIVE BY NATURE.
4)I HAVE SEEN one important use of fibonacci ratios, that when you can see a distribution or accmulation on the charts you can set the targets of the last phase after the distrbution or accumulation phase ends..we can see a DISTRIBUTION phase was going on between march -may 08..targets of which are 12226 and 3637 in sensex and nifty respectively ..one can understan my concept by looking at attached charts.
5) here are some fibonacci ratios for indices,a) if you take the low of may-04 to the top of jan-08..12688 and 3813 are the 50% retracement levels...B) FROM APRIL-03 LOW TO THE TOP IN JAN-08..50% rretracement level is 3631 C) octo-02 low and jan -08 top..12013 is a 50% retracement level for sensex..D)IF WE TAKE SPET-01 LOW AND JAN-08 TOP..11907--3605 ARE THE 50% RETRACEMENT LEVELS...........
...so weather the markets are getting corrected off the rise from the lows of 2002---2003 or 2004...the 50 % retracement levels are between 11907---12688..my target is 12226..for nifty it comes in between 3605--3813...
6)the highs made by indices tends to give support when they get corrected..we have a SIGNIFICANT HIGH of 12671--3774 made in may- 2006..
7)similarly for SIGNIFICANT LOWS we have lows of 12316--3554 made in panics of march-07....SO MY CONCLUSION IS WE ARE VERY MUCH NEAR A SIGNIFICANT BOTTOM.
BHAVESH NAIK.Wednesday, 02 July, 200808:21:36 AM