Nifty - The Sleeping Monster Route-Map

NIFTY LONG TERM

I believe this is a real candidate for the probable path Nifty will take, but my belief isn’t worth a dime. Still, it would be interesting to watch if it takes place like this or not.  A clue – my belief gets more strength from the long-term picture of USD-INR. But that’s the subject of my next post.

First and foremost, Neowave novices like me must know something about the 7-legged pattern called “Diametric”. In the words of the discoverer Glen Neely himself – 

These patterns began to appear in the early 90's as the market's way to adjust to the increasing popularity of wave theory (too many people were looking for the same things, so the market created new ways of behaving). 

They were the first patterns witnessed where most wave segments took about the same amount of time, with one or two of the waves consuming a little more (or little less) time than the others. 

 While most waves consume a similar amount of time, they do NOT consume a similar amount of price. A Diametric will possess an obvious expansionary or contractionary bias during the first four waves of the pattern; that bias will reverse during the second half of the formation. 

It is called "Diametric" because it combines two Triangular patterns, one initially “Contracting” up to the "d" leg, followed by an “Expanding” one. The contraction point is the "d" leg, and the legs on either sides of it tend to be equal.

Now let’s check the first part of the chart, the period of 1992 to 2001 & the time-similarity is unmistakable. Indeed, that is the first clue of recognizing the pattern.4 out of 7 legs, spread over a period of 9 years, take exactly the same amount of time. Intriguing!

To measure & compare price moves in a long-term scenario, it is advantageous to go to percentages. 


Let’s check it – 

NIFTY 1992 -2001

The similarities between A & G and B & F are so very obvious. Even C & E differ by a measly 4%.

Coming to the 2008 onwards scenario now, we find the time-similarity again, where 3 out of 4 legs (A, C & D) have taken nearly the same time.

Another very interesting thing – the total time taken for the first 4 legs (A to D) for both the instances are the same – 66-68 months.

Price-wise – 

NIFTY 2008- 2017

Going by the same property of a Diametric, we can expect this ongoing E to be equal of C or about 29% drop from the high of 6229, giving us a target of around 4400 (approx.) in the next 15-21 months.

The implication? The next year & half is going to be a grind, trying everyone’s patience, a virtual nightmare for traders and investors alike. Only very nimble-footed traders may survive. Trend-following strategies may under-perform for this period but could be back with a bang after this, whenever the F leg starts.

IF all these come true, then we are going to witness one of the finest rallies from the second half of 2014 or early 2015. This also matches nicely with the 8 year cycle, giving us a projected top at 2016. Then a vicious bear market which would precede the next mega-bull market. The final bottom could be anytime between 2017 & 2019.

The red channel can’t be overlooked. It contains the whole secular bull market. Irrespective of the Diametric scenario coming true or not, whenever Nifty touches the channel, expect a MAJOR multi-year move.

The median line of channel (thick green line) has worked nice & clean after 2001. A break of that line has always created a swift move, in any direction, since then. Currently it is at around 5300. Keep watch.

CREDIT: FIRE