DESCENDING TRIANGLES PREEMPT DOOM FOR THE INDIAN MARKETS

           In the last post we saw how the nifty has formed a running descending triangle and is on the verge of breaking down from it. In fact forming descending triangles during bear markets seem to be a speciality with the Indian markets since the 2008 top. 

       [A descending triangle constitutes a pattern where a series of lower highs alternate with a series of lows at the same level  therby forming a contracting pattern with a downward bias. Both an Elliott wave pattern as well as a traditional charting pattern, it is a well defined continuation pattern.]

         Check out the following.

          The 2008 decline manifested in two distinct phases, the Jan-March 08 decline and the September-October 08 decline. These two phases were separated by a classic descending triangle.

    

            As already shown in a previous blog, the 2011 bear market also formed a classic descending triangle on its way down.

     

          The March-June 2012 correction also sported a contracting triangle which is almost descending. 

   

           And now we have this.

       

          Please note that irrespective of the strength of the decline prior to the formation of the descending triangle, the breakdowns post the triangle have been quite furious (obviously in context of the size of whole bear market). In 2008 it was what one may call relentless and breathtaking. 2011 was also a torrid affair. No marks for guessing how I feel the current one will fold out.

SIMILARATIES GALORE BETWEEN 2011 AND NOW

        As shown in the previous blog (here), the 2011 bear market was wave C of the 50 month running triangle. It manifested as a double three, an expanded flat ( wave w), running descending triangle ( wave x), followed by a sharp zigzag down(wave y).

         The current supposed bear market starting from the 30th January 2015 top is expected to be wave C of an expected triangle or expanded flat.(see here). This wave would be two degrees higher than the 2011 bear market.

2011 Bear market

      There is an uncanny resemblance in the structure of this bear and the one in 2011. The structure from 30/01/2015 to 12/06/2015 appears to be a clear expanded flat with a well divided wave C. The structure post the flat has evolved into a potential running descending triangle, just about complete. If the count is same as 2011, what follows from here is the sharp zigzag 'y'.

       Remember wave Y from 25/07/2011 to 02/01/2012 formed the meat of the bearish action in that year. What happened till then was basic distribution. In fact I believe the following picture more correctly conveys the possible carnage as opposed to the above picture.

   
       It follows from the structure formed that the whole sideways consolidation that began since 2008 is likely to play out as a huge multi year running contracting triangle. The other alternate (an expanded flat..see here) is practically eliminated because a flat would demand a five wave impulse or at least a leading diagonal structure from the top of wave B. The current triangular formation since June 2015  eliminates these possibilities.

Structure since 2008 top

     
        The most remarkable point of the similar structure is that both waves are waves C in triangular formations. (albeit of different degree). If the count is correct and wave 'y' of wave C is about to commence, the next six months shall see a bloody bear market similar in scope to  September/October 2008. The first sign of such a move would be a break of the lower triangular boundary line currently at 7550. The distribution for such a move has  already taken place. This scenario goes well with our other cited  possibility of the eight year cycle.(see here).

      Remember while comparing the current wave with 2011 that this one is two degrees larger and in all likelihood, is an adjacent wave of he 2008 bear market.