20 March 2014: Nifty Elliott wave analysis: A gap down coming after fed statement. If it breaks 6480 then we may see violent reaction. Resistance zone = 6565-6575. Focus on possible diamond formation at top.

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

For 20 March 2014: -

On 19 March 2014, FII Bought INR 1069.74 crs and DII Sold INR 610.96 crs

Outcome of fed minutes was not very encouraging. They gave further 10 billion cut in bond buying program which is in line with market expectation. What disappointed the market was that fed chairperson said about the possibility of rate hike next year.

We are close to the end of low interest era in USA and this is a bad news for emerging countries. A technical chart of Nifty has also shaped in an odd way. It has traded narrow and giving a hint of wild swing before expiry. It could be on either side but we are getting reasons to see that swing on negative side.

We have reasons but it needs to come in an actual term. So, question remains same. Will we get the break below 6480? We have a possibility of event based ‘bear gap down’. If today’s gap (no matter even if it comes smaller) fails to fill then it may turn violent in coming days. Nifty is almost forming a diamond top formation which generally ends with sharp impulse up or down. If it breaks 6480 then we will see a likely down side impulse which can potentially bring Nifty towards 6300 in quicker time.

On higher side 6565 to 6575 will be decisive hurdle..

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Strategy for Nifty March future – Opening is going to be negative due to overnight development. In the down side, it will have support at 6520-6510 levels. If it breaks 6510 then only we can think about decisive profit taking to hit. Let us see if it takes out 6510 in the process of gap down. Keep your eye on India VIX. It can see some decisive move on higher side.

S&P 500 (USA) – So finally, Yellen said something which market does not like. She speaks out about the possibility of rate hike in spring 2015. This makes the market nervous and S&P tested the support of 1850 before last minutes bounce. There can be two technical aspects. One is one can add long with stop loss just below 1850 or one can wait for the break of 1850 to short. I prefer the later one. Wait for the break below 1850 and then add shorts. It may test 50 DMA which is at 1828. This is last and final support.