03 December to 07 December 2012: Wave Analysis: Nifty shoots up more than what I was expecting in last week. Expect silence now with resistance at 5912. I will prefer to buy in correction only.

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

This week outlook: -

I was definitely sensing 5720 for last week but I have elevated my targets depending on conditions which were mentioned in my daily article. We have seen a rise of almost 330 points from its recent bottom of 5548.

I took many long deals when we were trading near 5550. Now, I give up my partial long deals. Most of you must be thinking if correction is coming. Well, there is nothing on the technical charts which can suggest correction. Take a note that we closed almost at the high point of the day even on Friday. It was third day of bigger rise in a row.

I can say one thing that we are definitely at least near to resistance. We have all time high at 6338 and a low at 4530. We have 23.60% retrenchment from 6338 which is ending at 5912 levels. Now we are almost near to those levels. Market is on very high note of bullishness. This is backed by implementation of reforms.

1. Now market is going to see the voting of parliament on FDI in retail. Most of us are accepting that UPA government is going to win the voting. I always believe that there is a big difference between ‘winning’ and ‘possibility of winning’.
2. I have not given any good importance to 5.30% GDP data yet as parliamentary development was overlapping that negative news flow. I can ignore 5.30% GDP at NIFTY @ 5700 but I cannot ignore that at 5900. I like to say that market must be expecting some real hardcore concrete step to check the fall in GDP. Market will react on any such positive development.
3. There are few talks for the rate cut. People will have a view that now RBI will accept the fact that government is moving ahead with reform process. There are big group of people who believes for rate cut to make sentiment more investment friendly. I little disagree with market views. I feel that when government is concerned towards growth so RBI will feel free to focus on ‘inflation’.
4. US Fiscal cliff – Problems of fiscal cliff is a flip-lop new flow. Some time it is looking like problem is about to be solved by just in next few days. Then, suddenly, we came to know that we are far away from solution. I am 100% confident that problem will be solved so question is when? This can make market little uneasy.
5. VIX – Take a clear cut note that rising VIX is an indication of fall. Weekly VIX chart is making me troubling. I am scared that it can be advance sign of topping up. Although, I am not going to act on this fact immediately. Certainly, I will be cautious for this week ahead of events.

Conclusion Nifty – I have traded long for two week but now I am not ready to take a risk of trading long after sharp rise and events in parliament. Weekly, charts are hinting for resistance at 5912 levels. I will prefer to buy in dip if it comes with one-third magnitude of rise. It means, I want to buy in the dip of 80 to 110 points of Nifty. Is it coming? I do not know but I will wait for dip to buy. Here is an another fact, cross of 5912 will give us 6000 marks. Technical support for correction will be at 5770.  

S&P 500 – In my daily updates I have already said that it will go under consolidation. It will not cross 1418 to 1424 resistance. I am expecting this consolidation to continue for this week also. Cross over of 1424 will give us 1445. There is a caution; it should not close below 1405 anyday. If that happens then we have to take fresh look.  

FDI in retail – Voting will take place this week. Be ready for surprises. BSP has not yet declared its move. Technical charts are saying that we may see a dip irrespective of outcome of voting on FDI in retail.

Regards,

Praveen Kumar