Difficult Situations

Our current market has been creating waves of confusion among everyone's mind. We are probably the only known market in the world, where the Index is near to its 52 week highs. All other markets, developed and emerging, are almost 12-14% off their highs. China's Shanghai Composite has been trading at 52 week lows.

The question of India being completely decoupled with global markets have risen once again. Whether it is or not, I dont have an answer to it. Neither anyone can say it for sure. To my understanding the downside had to come. It came but alas !!! It came in all other markets except ours. So, I am wrong...atleast as of now....

Now what might happen ?

Two scenarios are present. One, global markets continue the fall or consolidate laterally and India slides down from hereon.....OR secondly, global markets being oversold gives a 5-8% type of bounceback and India, being an outperformer, moves up another 10-15% to new highs.....I dont know exactly as to what will happen.....

Weekly stochastics have moved in the overbought region. Daily stochs is negative. So we might see a downmove towards 5210-5180 region after which a fresh look has to be given. Only a fall below that might continue the downtrend. For any fresh upside, a close above 5335 is necessary, which is the extension of the brown diagonal A1-A4-S' described in my previous article. (Attaching the photo for reference)

So, as of now, one should maintain a cautious approach and be hedged in their positions. Maybe a better trend will emerge by next week....

GOLD

One more thing, in case, I forget to mention later. As some asked me regarding gold a few days back, my sense says Gold had made a short term top around 1265 dollars. The simple reason is the 5-times theory. When any asset class moves from a major trough, it sort of hits a major resistance at 5 times its price. Gold rallied from around $ 253 in 2001 after coming out of a 20 year depression in prices. That means that 5 times of that is 1265 dollars. The recent top has been $ 1264. If that is taken out, the next step would be 8 times of base level and then 10 and 11 times.

Another logic of calculating price increase or decrease is based upon Fibonacci nos. Fib nos are 1,1,2,3,5,8,13,21..... So, whenever a price corrects or appreciates, generally it follows this rule. As for the the 5 times theory, it also coincides with a Fib no, which makes it even more stronger.

Enjoy trading and learning.....

1. Fibonacci Trading: How to Master the Time and Price Advantage
2. MONEY & RELATION TO PRICES (Gold, money, inflation & deflation)
3. Trend Forecasting with Intermarket Analysis: Predicting Global Markets with Technical Analysis (Trade Secrets (Marketplace Books))