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.
