THE BULL MARKET IS ON

SUMMARY:

The downside looks limited for Nifty and it looks very likely that we are in the beginning phase of a major bull market that may go till March-May 2021.

THE BULL MARKET CYCLES:

The random noise of the short term movements make us forget that the Indian stock market is highly cyclical in the long term. But it is not always evident as the lowest lows rarely mark the end of the bear market cycle, i.e. the final bottom. The chart below shows the actual bottoms of the last few bear markets and that makes the cyclical similarity of the bull markets clear.

All the last 3 bull markets enjoyed a rise of 3800-4000 points and every single rise took 20-21 months. This symmetry, both in price and time, allowed us to make successful projections in the past and may allow us to do so once more.

But before the projection, we may check the bear market cycles and the shape of the corrections that shifts the major bottoms far away from the lows.

THE BEAR MARKET CYCLES:

Dow Theory or Classical Elliott Wave doesn’t provide us with the proper patterns relevant in these particular cases, which we get in Neowave, the refined Elliott Wave Theory championed by Glenn Neely. Neowave has two more Triangle patterns, which look a bit like the traditional Inverted Head & Shoulders pattern. We will not get into the details of the patterns here but here they are – 

These two are called Neutral Triangle and Extracting Triangle respectively. You may ignore the text on image for now.

And now we can clearly see the same patterns formed in Nifty in the periods of 2010-13 and 2015-16. And immediately once again, the symmetry in price comes out. 

The first and the second bear market is almost the exact same but the third one is very close too. The last correction took the form of an Irregular Flat, a classic EW pattern. The higher end point for C makes it a Running Correction, with very strong bullish implications. It actually signifies the bulls are impatient and that’s the reason higher highs and lows have been created even in a corrective phase.

Time symmetry is also there, as shown on the chart below.

Keeping these time-price symmetries in mind, we may expect the 2019 low of 10638 to hold for the next few years and a rise to unfold.

For supporting evidence, we will check two Fractals (similar pattern and consequences).

Fractals:

The first Fractal chart compares the current Nifty pattern with Dow Jones in a higher time frame (monthly). Self-explanatory. Just follow the numbers to check the similarity.

The second Fractal chart compares the current Nifty pattern with Nifty itself in a lower time frame (weekly). Self-explanatory. Just follow the numbers to check the similarity.

Conclusion:

Combining it all, we may assume the higher probability of 10638 being a long term bottom and a bull market going on for the last 3 months.

The time symmetry of the previous bull markets allow us to project a 20-21 months cycle from the bottom, which comes to March-May 2021.

From the price symmetry, we can expect anywhere between 3800 and 4000 points from the bottom, which gives us the range of 14438-14638.

P.S. Note the change in the angle of the long term channels, from the violet to red. That is a sign of increasing upside momentum. So a revision of the targets, to the higher side, would not be surprising. Anyone curious about the implication of the change of angles may check this oldarticle of mine, written in 2013. 

Nifty – Bear Market possible for next 12 months

Summary:

The upside looks limited for Nifty. It is possible that we are in the beginning phase of a multi-month corrective phase with the possible target around 9100 in 2019.

Limited upside:

On 10^th July, when Nifty was trading at 10947, the following chart was posted –

It showed similarity in magnitude between the two major rallies that had taken place in 2009-2010 (3800 points) and 2013-2015 (4000 points).  The two rallies were interrupted by a 33-month corrective phase (2010-2013) and a similar corrective phase of 22 months followed the second rally (2015-16). In the first corrective, the distance from the 2010 top to the 2013 bottom was 1219 points, which was almost exactly the same with the distance of the 2015 top to the 2016 bottom at 1225 points.

It must be noted that both the corrections were Neowave Triangles, first one a Neutral Triangle and the second one Extracting Triangle.

This similarity in rises and corrections persuaded us to project the pattern in future and gave us targets of 11694 and 11894. In the last week of Aug’19, the first target of 11694 was achieved and Nifty made a high of 11760 before turning back.

Now what?

Whenever the minimum target is met, the chances of a correction increases and the probabilities of further upside get shaved. Nifty has already met the first target of 11694 and the next target of 11894 is only 134 points away from the high of 11760. Clearly, the upside is limited.

Downside possibilities:

Now let’s check the same chart, updated with some modifications –

Some of the Elliott Wave analysts could mark these 3 near equal rallies as completion of a 5-wave impulsive move (Where 1=5) or a Triple Corrective but whatever the count is, the implication is the same – a major corrective phase.

Also evident from the chart above, all the price action since the 2009 bottom till now is contained in the Red channel and the latest rejection has taken place exactly at the upper boundary of the channel, implying a possibility of testing the lower boundary in the coming months.

A major confirmation of the long term bearish scenario may emerge on the break of the lower boundary of the Green channel, which stands around 10800 for the current month of September but rises to 10900 by October.

Significance of 11760:

Another chart shows the importance of 11760 as a major level. Check here –

All EW and Fibonacci analysts are acquainted with the External Projection, which is used when the market is in an expansionary mode. Here, the magnitude of the 2003-2008 bull market has been projected upwards from the 2008/2010 top which gives us the target of 11760, increasing the significance of the level.

Possible depth of the correction:

As seen from the second chart, in the coming months, Nifty may target the lower boundary of the red channel and find strong support there. By Jan-Feb’19, the channel will rise to 9000 levels and with each passing month, it will get higher.

For another perspective, we may consider this simple chart –

The difference between the 2008 and 2011 lows comes at 2278 points, which is remarkably similar to the difference of 2295 points between the 2011 and 2016 lows. Projecting 2280-95 points from the last major low of 6826 gives us the possible target of 9120 in 2019, which coincides with the lower boundary of the Red channel discussed above.

Conclusion:

It may be too early to be this much bearish as the global markets stand firm till now, but the technicals definitely suggest extreme caution for the next few months. As long as Nifty trades below 11900, the bearish scenario survives. A break below 10800-900, if comes, will be a major boost for the bears.