23 January 2013: Nifty Elliott wave analysis: Nifty hits its critical resistance at 6100 and then slipped. We have further extension in 20 EMA support @ 5990. We may go close to 5990 sooner.

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

Today’s outlook: -

On 22 January 2013, FII bought INR 1046.40 crs and DII sold INR 855.35 crs.

Looking above figures, one can say that FII are still finding Indian market attractive. There is no denial that nifty is hitting crucial resistances on daily basis. Yesterday it hit resistance at 6100 marks. We have seen reactions at higher levels and Nifty came lower to hit 6040.

Crossover of 6068 had generated target of 6100 but I was not very confident for crossing 6100. A fall from 6100 might be the first indication of some fall. My focus will be at 20 EMA. I am mentioning and plotting 20 EMA on my charts from past many days. As of yesterday’s closing, 20 EMA is at 5990 levels. Current up wave can reverse only if we see two closes below 20 EMA.  

I have no idea at all about the reason for price correction. Charts are suggesting that we might be forming top. We cannot conclude anything from just one day of intraday fall. Question is that we will we get follow up in selling? If yes, then it may try to come near to 5990.

Based on wave theory, we are on fifth wave progression. Now, there is a big problem in this fifth wave. It is running with negative divergence on crucial technical indicators like MACD and RSI. This weakness of technical indicators is giving all signs of uncomfortable moves.

There were some reports that unemployment rate will be highest in the year 2013. We have some selling in global market when we were trading but those have recovered to a good extent in night hours.

One more thing, RBI may not go for 50 bps repo rate cut looking on inflationary environment. This can be disappointment for market but market is not discounting this yet.

Strategy for Nifty January future: I said yesterday that you can expect the test of 6060 unless we stand tall above 6111. It hit a high at 6109 and then we all know what has happened. For today’s session also technical levels of resistance will emerge only at 6111. It need to be a wild day and perhaps majority of reactions will come in second half. Technical charts are giving me the indications for the test of 6000 marks. Premium fluctuation will be troubling.

S&P 500 – It has some high at 2007. VIX is running below those 2007 levels. When investors turn so fearless, I start fearing. Definitely I am not trying to be over confident as there are genuine sign for fall. It is now at 1492. It has extended above 1475 but may fail before 1500.

Regards,

Praveen Kumar