Aug 042011

The price action over the last few days have been quite significant. Many world indices have seen reversal in their major trend.

S&P 500:

S&P 500 Daily Charts - Primary down trend

In my last post, I had warned that the S&P was poised to break the lows of June. Not only did that happen, the S&P took out the "Earthquake low" of March both on an intraday and closing basis. Some technicians might even make a case for a head and shoulders top for the S&P (see the violet ovals and the violet dotted line). Excluding the Nasdaq ,all other important indices -the transports, the industrials, Russell have also blown through their June lows and they all make a strong case for the start of a primary downtrend in the US markets.


FTSE Index - Triple top

UK's FTSE index in a similar fashion has plunged through the June and "Earthquake lows". The close below 5650-5600 zone marks the completion of a triple top. Over the next few weeks and months one can expect this index to drop to about 5100.

French CAC:

CAC 40 Daily Charts

The CAC 40 was first among the major European indices to drop below its major support and reverse into a primary downtrend. The Index is trading at a 11month and has found temporary support at the 3400 levels. Look for more selling pressure post a relief rally.

German DAX:

The German DAX though above the March low, has clocked a clearly identifiable lower tops and lower bottoms and thus has slipped into a clear primary downtrend. As a confirmation to this reversal, it is very likely that we will see a move below 6500 on the DAX in the short-term.

A noticeable uniform similarity in all these charts is that all the indices are trading far below their respective 200 day moving average (the red line). This is not a corrective behaviour, this is typical bear market behaviour. While EM and DM looked oversold and are likely to bounce in the next few sessions, one must not mistake the relief rally as the end of the correction. I, for one,  would look for signs of the contagion spreading. Its starting to look like 2008 for global stock markets.

  26 Responses to “Is it redux 2008?”

  1. Fantastic…Analysis….Dear but what about nifty ? Nify can make a new low or Consolidation ? i m waiting for ur reply….

  2. whats ur view on nifty ? Dear Sir ,

    • I have not altered my view of ATLEAST 4800 Nifty since January. Check my previous posts on Nifty.

      Thanks for your comments.


  3. Hi,

    Gold and Silver charts and analysis, if you please…
    Crude and other metals will also be appreciated…thanks…:)


  4. Hi again,

    Metals – more specifically, Copper and Zinc…:)

  5. Hi Jai,

    If convenient at your end, could you please tell a li’l bit about the zig zag corrections in Wave5 with a special emphasis on the recent run from 5200 to 5700. If I understand correctly, that was the last leg of decline which suddenly changed direction which left everyone bamboozled,


  6. First things first, congratulations on a fantastic call on nifty and capital gds.nifty having filled gap support of 5330 -5350 do u expect a short term reversal of any kind.also if u track alstom project can u give ur view on short in alstom the only cap gds stk which has not corrected inspite of disastrous qtrly aware of all those corporate action rumours doing round in it.

    • Thanks Rajesh. From the LT charts I still feel there is at least one leg of decline that takes Alstom below the low of 492. You need to work on the timing.

      Good trading to you,

  7. Dear Jai,
    It looks like another 2008 in the making as you said, Now most of them are trading very close to the feb 2011 lows. I think those lows will be on the watch before many believe that its a bear market.

  8. Man…..

    U needed be awarded for this call. this is as good as it gets. You need to be proud and deserve a really cool drink to this prediction. As good as it gets!

    Considering the present earning season,u must have been in Cognizant rather than in HCL tech 😉 u r good !


  9. Spot on… while everyone was commenting that why do you have to be such a got it right!!!

  10. hello sir as usual very accurate analysis

  11. Dear Jai,

    How should we play now..any recommendation :)..

    warm regards,
    vimarsh p vasavada

  12. Jai,

    It sliced thru the 5177 very easily. Do you think there is a bounce back at this time ? Or do you see a further fall to 4800.

    Also, How does Reliance Infra look to you ?

    Thanks for your help.


    • Rut/ Vimarsh,
      We can expect market to go from point X to point Y but very tough to say which path it would take. Until 4800 is reached we shud look to sell rally if any.

      Best regards,

  13. thank u by using u idea nifty come to 5200

  14. Dear Jai

    Congrats on correct analysis, any specific sectors for long term investment.

    • Dear Kannan,
      Bottoms occur over a period not over a day or two. So there will be enough time to decide what and when to invest. I think now is not that time.

      All the best,

  15. hi….. great to see tht ur study of the markets have borne results… though i managed to stay away from the market during this fall…… and also i m expecting the market to see 4800 levels…. but what is the time frame that u see…. do u consider a bounce to 5300 levels and then falling to 4800 or this steep fall will continue…..????
    my second point to ponder… u think tht from 4800 levels there will be steep rise as we had after the last two falls in march and june……. i would be grateful if u could show those with the charts..



    • Optimus,

      Both are possible scenario. At 4800 we have to evaluate if its going to be a durable low – nevertheless I expect a substantial rally from 4800. Will try to post something on Nifty.


  16. Substantial rally? Or bounce and/or continuation to…maybe 4300 or something…??

    • Remember Jan 2008? Remember the rally from 4400 Nifty? 🙂 The odds of continuing is certainly there – more during our pvt discussion.

  17. Jai,
    Thanks for ur effort to work with this blog and this community. Logging on to ur blog has become a daily activity now. Thanks.
    Agree with ur comments that bottoms are not made over 1 or 2 days. Any sectors which are showing strength or likely after to the fall today.

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