24 December 2012: Nifty Elliott wave analysis: Nifty came closer to 5838 zone again. Decisive push will result fall towards 5770. Concerns remain alive over US Fiscal cliff.

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

Today’s outlook: -

Till now there is a no great development yet on US fiscal cliff issue. We are moving near to derivative expiry but we have not seen anything great yet on indices beyond 100 points of trades throughout the month. Important is that it is happening after massive FII flows which is more than 2.50 bullion USD. Global market is turning silent near to weak near holiday season.

Technical charts were already suggesting for no rise above 5967 but we are unable to see great technical trigger. It has saved every time. In my views, if Nifty starts sustaining below 5838 then we can be in position to believe for a move towards 5770 marks. As of now indices futures are suggesting that we may little higher. We need to remember that we have seen a gap down n Friday which might be treated as bear gap down. This gives me a sense that we may see massive resistance in the zone of 5888 to 5900.

In the current rally, best suited moving average is 20 days exponential moving average which is saved every time. We need to note that frequent test of support can not be good for rising market. I am expecting a choppy market. I am feeling that a close below 5838 will change the behavior of many medium term indicators. Even now it is visible on MACD and RSI, both are showing more weakness than actual indices.

To be honest I am lot concerned with the behavior of negative divergence on MACD. I am equally concerned over VIX chart. Remember that it was VIX chart which has indicated first that we may not see the highs which market was expecting. Then we got follow up signals from band Bollinger.

This type of formation can drag indices lower near to the top or you can say that it can trigger profit taking. These cannot be easily tradable levels. I have already said in the beginning of last week that this market may loose patience very soon. Have it already lost?

Conclusion Nifty: One must have an eye on 5838. If it trades below 5838 for just 5 minutes then we can see higher degree of fall. You can conclude that if we start trading below 5838 then this month expiry will end up on nervous note. Technical resistance will be at 5888 to 5900. I have quoted the importance of 5888 many times in past.

S&P 500 – I do not need to change my studies. There are senses that many traders would have stoploss at 1400 marks only. I am sensing that we will the levels of 1400 by this week only if we fail to get any solution over US fiscal cliff. I do not know how far I am correct but I am sensing that US policy makers are not willing to give any solution. So tax hike is coming for USA???

Regards,

Praveen Kumar