10 October 2012: Nifty Elliott wave analysis: Is the current valuation justifying stock price? Wave theory is denying those. It seems that short – term top has formed. Support for NIFTY @ 5630.

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

Today’s outlook: -

Yesterday I have quoted as, “It may open higher by 25-30 points, say @ 5700 levels. Then it may fail at 5725-5730 zones at the max.” It hit a high @ 5729 and then slipped. Apart from that, 2 days back it was quoted that if S&P 500 (USA) fails to cross above 1475 then it may also act as short term top. Those were two recent finding of wave theory applications.

I am already saying that market should not try to discount up coming quarterly numbers. It seems that now market is sensing those. I like to draw your attention towards MACD which has given a sell signal in the last trading session. We must note that last sell signal has seen a divergence. We have three sell on RSI also in past few weeks. It cannot be easy to surpass this kind of trading signal.

I am still not saying for much bigger cut in market. I like to see the market behavior in the zone of 5638 to 5630. If it break and close 5630 then I would be in the position to say for concerning dip. I always prefer to take market in a phase manner. Current phase seems to be a shaping up for weakness.

On the higher side we will face stiff trading resistance first at 5730 and then at 5750 levels. Cross over of 5750 will again lead us towards 5800 levels. In the down side, if I consider the beginning point of this rally from 4770.then even 23.8% comes at 5567. So we are still too far from any crucial Fibonacci support levels.

There are few more important developments. Euro zone is again giving all signs of burning. I have already criticized Mario Draghi when he comes out with his great idea of ‘unlimited bond purchase’. Those has postponed the problems but not solved. At some point of time Euro zone has to face their bitter truth. This is not the one worse thing. Next was QE 3. Now what people are waiting for? QE 4? These are just the waste of money. Take a note that higher stock price cannot be the guarantee of generation of job. It seems that policy makers are running short of ideas to come out of this phase. I have one such, start creating government based job and stop relying on private hands. It will help to end the fear in economy and will able to rotate the money cycle. This may take time but I do not think that we have too many options now.

Lastly, I am assuming that only the ‘announcement of FDI’ can not solve problems for India. You need to create good environment to attract FDI. Where are those environments? Now a day, it seems that we are getting newer topic for corruption on weekly basis. Stock market can go up or down depending on many factors but economy always need to put on right track. That track is still missing even after efforts.

Bottom line is that I want to say that upcoming quarterly numbers and earning guidance may fail to fulfill the apatite of the market.