Topped?

Probably yes. I think it is more or less confirmed that we have put in the 5 and 10 week cycle highs last week. So now what next? The 2.5 week low will come first off of the 8/26 low(which was the 10 week or the 20 week low - doesnt matter right now - I will take it as the 10 week low for now even though my s/w thinks otherwise). The 2.5 week low will run approx 18-20 days - Of which we are done with 14 days from the low - So we should expect this low this week maybe Tuesday/Wednesday. Could extend to Thursday also. But in that approximate timeframe.

Remember that these lows include market holidays ALSO - Hurst methodology says that even on the days market is closed, we should count it as an actual trading day - Which makes a lot of sense to me - Because we are having market moving events all the time! Even when our markets are closed. A couple of weeks back is a very good example. Even on weekends lot of things are happening. So notionally our markets are trading all the time. So when I say 2.5 or 5 weeks, it includes all non-trading days also.

Ok coming back to market, expect some sort of low in the next 2-3 days. But it might be a weak low and we might just continue on to the next 5 week low expected beginning of next month. One step at a time though.

So last Friday I think was an excellent opportunity for discerning traders to add on to shorts. Break of earlier supports at 5100 and 5090/5080 was good for even conservative folks to add on to shorts. I kept adding on and on and now own a big amount of NF shorts and Index puts. Today I will roll that down to lower strikes essentially making them free and also will reduce exposure - Think I am bit over leveraged right now. So will reduce risk a bit. And ofcourse taking profits is always a good thing. I have NF shorts from 5125 avg price, 5100 puts(sept) and 4700 puts(Nov) probably overleveraged way above my comfort levels. So will reduce them today. Just trying to explain my trading strategy a bit. 5100 puts rolled down to 4900 puts essentially make them free for me and also puts some profit into the pocket. NF shorts hedged make them also protected - will book few lots profit also. 4700 puts(Nov) - These I will likely reduce by 30% just to reduce basis cost. All ideas for today. Will post updates. Also will add charts and more learning matter a little later today.

I mentioned last week - Worldwide things are looking real real bad. A crash cannot be ruled out. I just wanted to remind everyone to be really careful with how you manage your trades out there. Expect the unexpected.

Bharat, I will address your question shortly. You might have got some ideas from above.

EDITS:

1. I executed all trades as per plan above - reducing risk here - hedging the rest - basically what I am doing is locking in profits. I am getting risk free/very less risk right here. I dont know what will happen tomorrow - well lol not that much - I know a low is coming next few days - can be a weak low - can be lot of price destruction before that - but still want to be safe here. Hurst methods have guided me a lot here so I have to mention the same here.

2. Golf Dude said - "Cool blog. I like the fact that you also mention your trades. I think we are in wave 5 now ( 5170 to present ). I expect a turnaround 4950 for 2 of 5"

My reply - Thanks Golf Dude - Do you actually play golf/are you a golf fan? Lot of my friends over here in Houston play golf..They are trying to pull me into it...I am skeptical about it/worried about if I can get even time or energy to play it...But I might still go ahead and start playing it soon. I do know a little bit about the game.

Wave5 with 2 up - yes quite possible. I am not sure. I do do a lot of EW. But nowadays give less importance to it. I see the possibility. But will wait and see.

3. Bharat said - " Dear Lee,

Considering that Nifty is STILL above the week pivot(4970), do you think there is a possibility that Nifty might meet R2 of the week (as said earlier), i.e 5229 in the coming week? Would it be wise to buy around 5000 levels if there be further downside of about 50-70 points?

AND SECONDLY, when do you think the downside cycles start again? You had earlier mentioned in your blog that we 'might' see 4000 some where in november... considering that, do you feel the 'corrective bounce' ends at 5177, w/o fillinf the gap and meeting 5229?
I have been following your blog and Ilango Sir's blog and the views that both of you present to us are excellent!
Actually the reason WHY I am asking you specific questions is because despite both of you use different methods of analysis, the outcome is similar and very accurate!"

My reply -

Always the possibility is there Bharat. We try to forecast the market. But trading is a totally different animal to deal with. Thats why you see so many blogs/sites tell you what the forecast is but dont tell you HOW to trade it. Trading is tough because that is when you deal with your most primal emotions - FEAR and GREED. Tough. We need to have some kind of pre-made plans but also need to have the foresight and planning to be able to modify that according to circumstance.

The downside cycles as you call them might have already started. We might get a bounce from somewhere around here to 4875 upward which should offer some opportunity to reestablish shorts. But either way I think the 2.5, 5 and 10 weeks cycle may have topped already last week. So this gives us some big downside targets. 4500 first, then after a bounce even sub 4000 to 3600 levels. Quite possible very soon. This is what will give us a platform for the next bull market.

As I have been saying for a while, the 80 week low is coming soon. As early as October end to November mid timeframe. So its close. Price destructions happens always as we get toward the low - this is why I have been warning for a while about crash scenarios and to tone down on bullish expectations.

Need to be flexible here. The reason I reduced shorts and reduced the risks is because I want to be safe here and also sleep well.

3. More comments coming soon. Just wanted to say, if you guys have any questions, feel free to ask. I wont bite lol..Its through comments only that this blog will get active again.

Read these 2 posts I made earlier - Read it, study it, I want to build on it. So this will form the first part of your Cycles Education -

http://theindianmarketblog.blogspot.com/2011/08/hurst-cycles-872011-backup-from-vfm.html

http://theindianmarketblog.blogspot.com/2011/08/nifty-hurst-cycles-815.html


After this is done, I would still recommend reading the posts after that. Remember guys - No Pain, No Gain!

4. I think its all looking really bad now. 4920-4875 needs to hold. Else good bye to bulls and we will break recent lows..Then its 4500 coming soon. Enjoy!
On the other hand, what I will say is looks like it is taking some support in this range 4920 I mean. So for more downside this needs to break. I am going to sleep guys..enjoy the rest of the trading day!


Best,
Lee