NIFTY CYCLE UPDATE

         In March I discussed the three cycles that were operating in the Indian markets. Here is an update on how they have fared.

         First on the 70 day bottoming cycle, I made a mistake in assuming that it might not work anymore because it was coinciding with the 89 day top scheduled in the first week of March. It actually made an accurate bottom on the 26th of February which is 71 days from 17 December and then indicated the next bottom on 7th may which was pretty accurate as well. The next bottom was due on 16th July which is not clearly visible. So let that be for now.

        The 89 day topping cycle beautifully caught the 4th March top and then indicated a top on the 1st of June. This worked pretty well too as the nifty went into a free fall from 2nd of June after the RBI policy. This cycle now indicates a potential top on 29-31 August.
  
       The most important and cunning of all was the 160 day bottoming cycle. Counting from 17th December gave 26th may. Despite allowing for considerable leeway, this did not fit in and I felt that the most consistent and important cycle had disappeared. However recently I noticed that after 17th December, the market made a secondary bottom on 7th January before it really took off in rally mode. 156-160 days from 7th Jan gives 12-16 June. INCREDIBLE. The major bottom so far. Apparently the market has skipped the period between 27th December and 7th January, the very two bottoms which I had considered as sandwich bottoms in that post. If this is just a coincidence, fine. Just going one at a time here, the next 160 day bottom would appear somewhere around 20-24 November. Let's see what happens.

A VERY BEARISH PICTURE

       

   
       This is my first post on Elliott waves and I think its a deadly one at that. The picture shows the Indian markets from the 2008 highs to the 2009 lows and then to the current 2015 highs. 

        The move from the march 2009 lows till date is a clear ABC ZigZag with a running contracting triangle as wave B. The contracting triangle is a large wave (50 months, from June 09 to August 13). Its as clear and crisp as can be and it satisfies all the guidelines of an Elliot triangle.

        According to Elliott, a triangle occurs either as wave B of a ABC move or as a fourth wave of a five wave impulse. What this implies is the triangle is the penultimate wave in a particular sequence of waves or more specifically put, the breakout following the triangle will be completely retraced. (and some maybe)

        In the current case of the nifty, five waves from the august 13 lows have been completed. This could then be a very important top that won't be taken out too soon.

        Digging deeper, assuming the 2008 fall is wave ((A)), then the move from March 2009 to March 2015 (if complete), forms wave ((B)), creating new all time highs. It then follows that the whole correction post the January 2008  high is either forming an expanded flat or a contracting/expanding triangle with wave ((C)) of the pattern due next. In case of the contracting triangle we would see a three wave move that falls short of the 2008 lows. Something in the range of 3000-4000 maybe. In case of the flat, we would see the 2008 lows being met or even crossed by a five wave downward move.

Expanded Flat

         Combining this pattern formation with the eight year cycle bottom due in Indian markets in 2016 (here),  this indeed is A VERY BEARISH PICTURE.  EXTENT WISE THIS BEAR MARKET COULD MATCH OR EVEN EXCEED THE 2008 BEAR MARKET.

So anybody up for the eight year cycle in the Indian Markets?

     The three major bear markets that have hit Indian markets in the last 3 decades shaved off approximately 60% of the main indices each time and occurred in 1992, 2000 and 2008. This eight year interval may sound like a coincidence, but maybe it isn't.  Maybe its a cycle.  If so, then its time to prepare for another 60% cut !

    All bear markets had their reasons. 1992 saw the Harshad Mehta scam, 2000 saw the internet bubble bursting as well as the  Ketan Parekh scam,  2008 the global financial crisis.  Bear markets of such magnitude always need a reason for the rationalists to discuss and debate. What most people don't realize is that nature has its own tidal rhythm.

     I don't hear anyone talk of the occurrence of this cycle and hence am inclined to believe that it might have one more go.
  
       Indian markets are stalling and fatigued and probably on the cusp of starting an intermediate downtrend. I believe the downside potential is huge.

        I shall talk more about such long term cycles in some future blog. Till then my sincere advice to all for the next 15-18 months.... Exitsville.
    
     
     
       
     

Possibility of an intermediate top in the Nifty

Nifty from august 2013

A chart showing the short term cycles on the nifty and the projections thereof.
An average 89 day topping cycle accompanied by a 70 day bottoming cycle seem to be ruling the nifty's moves.

My own suspect is that the 70 day bottom cycle may not work any more or may reverse into a bottom-top cycle...(this can happen) 

Also note that in this cycle the last bottom was taken as 27-12-14, the average of the 17-12-14 and 7-1-15 bottoms....(This sandwiching of bottom dates happens as well)

The Nifty appears to have made a short term top today 4th march thereby confirming the continuation of the 89 day topping cycle. Note that tops aren't absolute and can be exceeded i.e. they can be intermediate tops....after all we are in an uptrend...

However the most important cycle shown above is the 160 day bottoming cycle which predicts the next major bottom between 24-5-15 to  30-5-15...(Sell before may and go away?)....The position of this bottom may decide whether the uptrend is over or intact..

Please note that cycles are temporary transient phenomena that disappear sooner or later...But till they work, they can work beautifully.  Go only one cycle at a time...

VERY IMPORTANT ..... This is not a recommendation to buy or sell.....blah blah blah....

	89 day topping cycle
date		days
9/12/13
10/03/14		91
11/06/14		93
8/09/14		89
4/12/14		87
4/03/15		90

------------	70 day bottoming cycle
date		days
22/03/14
30/05/14		69
8/08/14		70
17/10/14		70
27/12/14		71
7/03/15		70

------------

	160 day bottoming cycle
date		days
28/08/13
4/02/14		160
14/07/14		160
17/12/14		156
26/05/15	?	160