Dow and Nifty - Relation

These days there is a clear indication that Nifty is slowly trying to break its 1:1 relation with Dow. The corelation co-efficient on a 5-day period with a forward shift of 1 period shows -0.197.......This means that with the movement of Dow, Nifty is moving in a somewhat different pattern the following day........But obviously one cannot totally neglect global effects.....

Currently Dow is in a clear downward channel.....The EW counts predict a 10000 - 9600 zone for Dow........Even if the House passes the bailout bill, Dow will remain subdued......Nifty is also in a down channel but we have already reached the level of 3700 on Nifty......The NSE VIX shows that the current volatility is around 34 which is considerably lower than that of peak 61 registered in end July......Hence we have a high chance of consolidation in a zone 300-400 points.........Further the patterns shown on charts are very similar to the previous two bear phases which suggests one considerable rally and then another fall to the same levels........

So are we ready for any upmove? Tough to guess and probably none is betting on that......Maybe we can buy some out of money options and trail at cost......October is a long and eventful series......Festivals, results, RBI meet, Parliament and many more.......So, why not take a chance and play the prelude to the actual meet......But be cautious...Do not take huge positions......And always keep some 3650 PE as insurance.....Lets see.......