24 September 2012: Nifty Elliott wave analysis: Rise will continue as long as ‘reforms’ announcement runs. RSI is indicating to form a top in 2-3 days of time if we fail to make higher tops. Market is expecting more such announcement

You must read previous articles and watch above chart carefully to understand this article completely.

Today’s outlook: -

First thing to watch on the chart is the ‘negative divergence’ on RSI on daily chart. It is giving me a sense that rise may sustain for 2-3 days at the max. There are few limitations for this study. If I make a wave count as A-B-C then, Friday’s high was close to 1.618 times of wave A. generally it can be a sign of completion of wave cycle. So rise above 5720 will initiate a new wave cycle which can have potential to push Nifty towards the 6100 levels. Will it be that easy with 5.5% GDP?

Perhaps, those concerns are reflecting on RSI on Nifty. Well, but same RSI is giving some different sign on baking index. Market is rising on ‘reform hopes’. Now, this market will keep on rising as long as we kept on getting those kinds of announcements. I am strongly saying that sudden hike in Diesel price hike and FDI decision should not be taken as guarantee of revival in economy. Those are just not sufficient. I still think that our economy has entered in trouble zone. Do you know that government of India has six fold its expenditure in last four years, which has nothing to do with subsidy and FDI? I am sure that rating agencies will not pleased the way market is thinking. Although, I do not want to give any great value to rating agencies, they are always biased and keeping Indian economy underrated.

Right now, market is expecting 49% FDI in insurance, FDI in pension, new company act, land acquisition bill, power reforms. List is so long. There are talks on some hard decision on sugar price too. I am afraid that quicker decisions are giving higher threat of much higher inflation.

Wave development: -

On 20 September - There is another factor which I cannot ignore with Elliott wave marking. It is a shooting inflation. Suppose if we break 5449 trigger point with some ‘concerning data’ from inflation front then also we will see opening for down wave. We need to prepare for those. Watch out for support at 5525 and then at 5449.