Saturday, October 27, 2012

A long term view of Indian Markets- 2012

As short term traders we have our noses close to the market. Sometimes too close, so that we miss the trees from the woods. It is quite beneficial if we lift our heads from time to time and have a look at the broader view of the market. Of course we will go back to short term market analysis after this brief detour.
May of 1992 had marked a bull market peak. Sensex had moved from 1000 in the 1988s to 4500 in 1992. A fourfold increase.
Thereafter, a multi-year correction process started. It took the shape of a diametric ( A-B-C-D-E-F) which ended in 2001. Thereafter another multi-year bull market took off and raced up all the way to January 2008, taking Sensex from 2000 in 1993 to 20000 in 2008,- a 10 fold appreciation. From 1988 to 2008, Sensex had seen a 20 fold appreciation.

Let us look at the scenario after January 2008.Sensex had started a multi-year correction process. People had mistaken the recovery from March 2009 as a new bull market. But multi-year bull markets which have seen manifold increase in valuations, will always take a longer time frame for corrections.
Accordingly we are in the middle of the correction phase. We have completed A,B and C legs are currently we are in the diametric D. We still have three more legs to go E, F and G. How E, F and G will pan out is a matter of conjecture and we will know the entire shape only when we are closer to the formations. 

Now the Astro cycles indicate a contraction in the latter half of this cycle. So after 2016, when a top is very likely, the ensuing correction of G could be very sharp, just as we saw in 2008.
And in that terrible pessimism, the next new bull market could be born. By the time that one ends, valuations could easily be 20 times of what they are right now.
The main take away is that on a practical, larger scale, we are in a big and prolonged correction. But the legs are so large that a careful and astute trader can make money over and over again.
Meanwhile happy trading.


  1. Hi suresh

    very nice again...u r using EW for generating setups / outlooks on a larger T/f , which is A1 the right way :-)

    So, i hv a small Q for u: the move labled as diametric B, looks like a 5wave to the eye.

    Can a diametric sub-leg be a 5wave ?


    1. Dear Shriram,
      Diametric Wave B was in itself a diametric. It was not an impulse, because the proposed wave 5 had too many legs.
      Coming to your question, yes sub waves of a diametric can be impulsive. A case in point is the present Flat wave from December 2011. It has both the A leg as well as the current C leg as impulses.

      Warm Regards,