SENSEX: Reaching Support Zone

Bombay SENSEX is reaching oversold levels on the daily, while approaching the support zone between 17400-17800. Expect to see some kind of rebound here in the short-term. It is too early to call an end to the correction here. Further updates will be posted as the chart develops.

SENSEX: Reaching Support

Sensex had a little dance at the upper channel support, before sliding down quickly towards 18200. Good congestion support here just under 18000, likely to effect a bounce at least. A sustained deterioration below this level will see 16000 area.

Strategy: This is a BUY zone, with a stop-loss at 17500.

SENSEX: Trendline Watch

Since my last update on the SENSEX, price has rebounded and stayed range-bound. In the process, a significant trendline (blue) from 2009 lows has been broken. There may be minor trendline support at current levels as indicated on the chart, failing which 18000 area should offer solid support. While the SENSEX is still in its teens, it's twin brother the KOSPI is making better progress towards adulthood.

SENSEX, Scandals & Socionomics!

In my last update on the SENSEX - "Kimchi Curry, anyone?" - we were at a cross-roads. Along with its maternal twin, the Seoul KOSPI, the index looked vulnerable for a correction. Instead, the Sensex took off to test all-time highs, with the Korean brother not far behind. The test failed & a sharp correction ensued. Price is just about to reach a significant trendline around 18,800 (as highlighted in the chart), with promise of a short-term bounce at least. Upside capped by congestion at 19,800.

Wave Count & Supports

In the longer-term, it is possible that we have finished 5-waves up since 2009, as illustrated on the chart above. If so, we are potentially looking at a bigger & longer correction here. Possible fibonacci retracement levels - 23.6% & 38.2% - are roughly at 18000, and 15600 respectively. They are also strong historical support levels and thus great buying opportunities!

Alternative Bullish Count: Waves 3 & 4 could be nested i & ii waves in an extended wave 3. In this case, we may not see 18000, and the SENSEX may continue higher to all-time new highs from here, Jakarta style!

Sensex, Scandals & Socionomics

According to the emerging field of socionomics, stock market prices are the result of the social mood  of the population in question. During periods of negative social moods (bear markets), some of the biggest scandals & frauds are unearthed. There are countless examples in history, with the most recent high profile case of 'Bernie' Maddoff.

"India has been rocked this year by a series of corruption scandals that have embarrassed the ruling Congress party, rattled markets and delayed reform bills as the opposition stalls parliament.  "... Read more. All during the recent attempt of the Sensex to get out of the bear market slump, and picking up steam during the recent declines. Feel free to research & point out any other examples in other parts of the world. You will be suprised how predictable these outbreaks can be.

All the best!

"Kimchi Curry" anyone?

Previous posts noted the remarkable similarity between the Bombay SENSEX and the Korea KOSPI indices. Both looking equally bullish, and both poised at crucial junctures. While price could go eitherways here in the short-term, they are both likely to go the same way. Have a look at these maternal twins below.

Elliott Wave Count

Having dropped in 3 waves during the financial crisis, SENSEX and KOSPI have turned up impulsively and look to be completing 4 waves so far. A sustained break above the upper trendline has upside targets as shown in the charts above.

However, do note that the supposed wave 5 has completed the minimum target (to exceed wave 3). Any significant correction here, would be great buying opportunities for the long-term.

Meanwhile, you may want to sample the basic staples of Indian and Korean diets - Curry and Kimchi respectively - before they become all the rage! Caution: Both are spicy stuff. (Similar phenomenon happened with all things Japanese, during, and after the Nikkei boom days)

All the best!

SENSEX, Soccer & Socionomics

What? Everybody knows Indians don't play soccer. Ok, here's why they should - at least this year!

But first...

Sensex: Approaching Upper Channel Resistance

Bombay SENSEX has been trending sideways-to-upwards since Oct-09, and has refused to make lower high or lower low yet! Contrast this with the panic in top world markets, and their corresponding world cup soccer teams. Daily chart below.

Sensex has dutifully rebounded off the lower channel line, and is poised to kiss the upper line, and historical resistance area of 18000. Note the converging moving averages around here, suggesting a setup for a significant move in the next few months. A sustained break above this area, will target just above the all-time highs of 21200. Initial support on a breakdown lower, is at the lower channel line.

Soccer

I wonder if there's correlation between country stock indices and their sports teams. A booming China clearly took the lead in the last Olympics, while England & France are struggling to stay afloat in the current world cup. If there IS a correlation, Brazil(or another S American team) might just win this year, based on its stock market outperformance since Mar-09! Among the "developed teams", Germany looks to provide the biggest challenge.

Too bad, the Indian national religion is Cricket! The line in cyan is the SENSEX.

Socionomics

If you like pschology, sociology and the stock markets you'd be interested in the emerging field of Socionomics. "Socionomics is the study of social mood and its results in social actions. It studies how waves of endogenously regulated social mood in turn regulate changes in the economy, political preferences, financial markets, pop culture, etc." ... and might i add sports? ;)

SENSEX: Trendline break!

Last post on the SENSEX, mentioned that "a decline here would be nice". Well, based on recent action, that wish may be about to come true!

After the euphoric rise from the lows, prices have been trying to clear the serious resistance area of 18000, without much success. A few sessions ago, there was a break down of an uptrendline (highlighted in pink). Although too early to tell, prices may correct some here, presenting good buying opportunities IMHO.

Very Short-Term Oversold

In the very short-term, 5 waves down look complete with oversold indications. This could result in a sideways-to-upwards shuffle for a while, before another leg down.

Support Levels

Minor support from bottom channel line, is around 16000. As mentioned in the previous post, strong support around 15500/14600.  A break below them might lead to a gap-fill down to 12200

A sustained break above 18000 at anytime would indicate a continuation of the uptrend.

All the best!

SENSEX: Trendline Watch

Those looking for a decent correction to buy into the Bombay SENSEX, have been terribly disappointed so far. The index keeps plodding higher and higher, and may retest all-time highs before any significant correction. Here's a look at the trendlines am watching.

Overall, the chart looks pretty bullish for the long term - potential Inverted Head & Shoulders, or Cup & Handle patterns all over. After declining in 3 complex waves from 21000 area, Sensex has rocketed skywards, and seems to have just finished/finishing some kinda wave 4 consolidation, at significant resistance area of 18000.

The latest decline from 18000 has been in 3 waves so far, rebounded right on an uptrendline, and looks set for more upside. A sustained break above 18000 will setup an advance towards the all-time highs of 21000.

A decline here would be nice!

Although unlikely, declines here towards strong support at 15500 would present a great buying opportunity. Also, it would setup a nice handle for further upside!

All the best!

World Markets Update: S&P500, Shanghai, Hang Seng, Sensex, Straits Times, Euro

Overall Outlook

Medium Term: Bearish
Short Term: Cautiously Bullish

In my humble opinion, for most markets, we've seen the highs for the medium term (except maybe Shanghai):

Believe this week is crucial for short-term direction.

S&P 500

SPX broke above bull flag, and is faltering at the downtrendline. Expecting a downwards consolidation towards 1097(staying above the blue line) on Monday, followed by an upwards breakout & grind towards the 1120 region. Around 1126, i may consider getting seriously short this market. A break below 1097, and this might be something else.

Shanghai Composite

The medium-term triangle scenario working out so far, as outlined in an earlier post. Currently, serious resistance at 3050. A break above will target 3250. A break below 2950 might change the picture. Support at 2700.

Hang Seng

As posted earlier, possible cup & handle, or in the immediate future an inverse Head & Shoulders leading towards 22000. A break above 20700 will confirm. A break below 19800 most likely invalidates. Support at 19400.

Bombay Sensex

Probably the earliest clue as to what may be coming - there was an attempted breakout above 16500 on Fri, but closed below it. If there's follow thru, expecting a rise towards 17400 followed by termination and reversal.

Straits Times

Possible break towards 2880 followed by reversal.

Euro/Usd

Although not a currency expert, expecting a reversal in the Euro, based on RSI divergence (green line)

Summary

Asian markets may offer clues as to what may be coming. Once again, correlations only last as long as they last! Highlighted above are mostly short-term bullish scenarios, if they dont materialise this week, things can get ugly.

We can speculate, but only the market is right. Watch the price action & trendlines - place your stops.

All the best!

Bombay SENSEX: Sensing a decline to 15400

Sensex has broken through all uptrendlines, and is gonna trend down for a while. Currently looks like a wave 4 consolidation just like Hang Seng. Final target for current decline is 15400, which is good support as well as the 23.6% retrace of the entire uptrend.