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Thursday, October 13, 2011

Crucial Juncture

No other way to describe it. It is a crucial point right now for the bull/bear case. I am not talking about short term here but little bit longer term.

Earlier I was looking for the 80 week low to be a good low..I mean a serious long term low below 4700 maybe closer to 4000 which would give lot of confidence for going long for a longer period of time. However, past couple of weeks action has had me rethinking on this. Now this might just be a way of conditioning by the market where after the weak shorts are weeded out, we just continue the decline in earnest and break all previous supports and lows. Remember this is still a possible scenario. However seeing the strength so far..the strength in internals and so on..Its making me think..that we might not go below 4700 this year. Maybe not even close. I still expect some basing and downward moves till end of this month to set the 80 week low..But am thinking it JUST MIGHT be a HIGHER low. Now this is just speculation at this point. But I am getting ready my 'BUY LIST' of stocks. To buy after this 80 week low..or during it scaling in.

I know market is supreme..prices are king..this is the reason why I have to tone down my bearish expectations at this point. Frankly speaking, it would have just been much better for the market to go lower than 4000 now itself and make a long lasting low. But it looks like that is not meant to be and we might not get much better than 4700 to buy here. So bottom line is expect weakness till end of month but it might be nothing more than a consolidation before the next big move up.

If this is what the market decides to do..I do not think it will be a long lasting low but just a low for this current cycle and the REAL long term lows will only come sometime next year...Preferably after the March-April timeframe - that will be when the next 40 week cycle tops out...And then bottom toward June-July timeframe. So again bottom line is, we seem to be creating some type of bottom here with backing and filling and it will be a good enough bottom until March-April of next year when we might go back to BEAR MODE.

All speculation at this point of time. But I think this is what is happening. So time might be close to buy for a few months to take advantage of those gains. I am not talking about FNO here..But cash..I will post when I start buying but I already started looking for good stocks with potential..Still refining the list. I will post here when I am ready.

Chart -


I think whatever I said till now shows up in this chart. For now indecision and probably and consolidation kind of move lower until the overbrought situation is resolved after which we can move above 5235 and higher. Frankly I dont like it..I wish it worked out differently but the market is what it is..And fighting the market will quickly bankrupt us. Our aim should always be to get on right side of market. Now its indecisive but I think market will show its hand in next couple of weeks. Till then hit and run trades will be optimum. If you know how to trade intraday, do that..else do nothing at all..Covering the few shorts I have today will my aim..I might just change it to puts to reduce my risk..And also I am looking at longer term stock holds toward end of month - I mean buying into stuff. I will post on that when I do..with prices..so that we can track it in a spreadsheet. I used to do this for FNO but it became such a hassle that I stopped. I think I can do it for stocks..So I will be doing the same very soon.

Chart shows last 5 week low came in Oct 4th..so now in last 5 week cycle. So like I said its downward right now..But as of now it looks so far like its not a new bear move but a consolidation before another move upward. Now this is just speculation on my part..Market will show its hand soon. Need to see where this might stop...Important points are 5000 and 4900 areas. Breaking 5000, can get us to 4925 area quickly. Breaking 4900, will get us to 4800 area. More than this at this point I see as doubtful - looking at the strength shown by market so far. I know all this can change in one day..This is why I am waiting till end of October before making any longer term decision. Till then hit and run only. Protection of capital is supreme.

I know someone asked me about INFY cycles..I tried so much couldnt get clean data for it..so many splits and bonuses that prices are skewed. If anyone has clean data, please feel free to share with me..CNXIT data is preferred rather than INFY..I will post an analysis after that.

EDITS: Market open: Covered all shorts. I am just going to trade intraday from now on. Atleast until some more clarity emerges. Did some longs..now covered and doing some shorts..Will keep doing this for some time

10:00 AM: Interesting..Looks like intra resistances are starting to kick in..Back in short like I mentioned..But I am doing intra for now..So I wont be posting updates on trades from now. But my broader view is posted above.


Best,
Lee

12 comments:

jigs said...

OMG
lee you too changing coat?
Yes market is supreme price is king.
Waiting 4 bear
Waiting 4 bear
Waiting 4 bear
And when ever bear will actually come no one believe.

Aly said...

Well now that you and also Mr. Kumar have changed the coats, I think the ground work is laid out for a sharp fall after some rise :) isnt that how the markets are supposed to work? Bears become bulls and then the selling start :). Today RJ is on TV saying that market is in long term bull cycle so I see some gains today before the down move starting next week. It may or may not play out. Its not backed by any technical study its just a hunch

Lee said...

LOL...Maybe small bear now..And big bear next year April :) Thats what I think now :(

Market never makes things easy does it!

Lee said...

Aly :)

We shall see..I think if bear has to come, it has to come before Nov 1st week..Else it defers till next year April..This is why preferred view for now..

If at all bear has a chance it has to come now..Else we all will be waiting...

And waiting...

And waiting...

While the market goes up without us!

After Oct 29th, I change to a bull.

Best,
Lee

Lee said...

Already started some pilot positions in stocks fyi..But they are just very very small positions..To track only..Only toward Oct end, I will start buying heavily as per my earlier views.

I know I might be totally wrong..

But that is the fun of it.

Best,
Lee

Aly said...

No I agree with you Lee to some extent. If you will observe, this 4720 bottom has very similar characteristics and shape to the one that we made in nov 2008 and mar 2009. (see the shape of the bottom in lower time frame like 15 min or 30 min time frame compared to daily time frame shape for nov 2008-mar 2009 low)

Why I believe 4720 is the low is the driven partly by similarity in shape and partly by the fact that banking stocks also bottomed out this time in second leg which is similar to what happened in mar 2009.

however at the same time I believe all of Nifty50 stocks have left a gap up along with NIfty around 4830 - 4860 though future values may have covered the gap. This gap in my view should get covered in next 2 weeks. and this 30 point gap is not very far right now so bulls will probably conceed the ground to cover the gap and lay foundation ofr the rally by simultaneously drawing the shorts in and then squeezing them out

So, regarding your view on long term scenario I do belive it is possible hence indicated that in my post yesterday. But I would take a decision on that only by seeing diwali trading if the market hasnt already broken below 4830 by that time.

for other observers, I am heavily short and my views are influenced by that and my trading record is very poor :)

Sachin said...

Lee,

As earlier said, dont frontload your options. :) :) :)

Earlier you frontloaded with LOWS lOws lows.. now you are frontloading with HIGH HIGH HIGH.. lets play one cycle at a time..

When everyoen is bull you should be a bear..and vice versa..shorting @ 4700 is not good..but shorting @5200 has better risks rewards.. the gap at 5220 was broken in August and should not be broken till november... IMHO.. I was long all this while and now i am starting to build on shorts..via puts.. a single tick above 5230 is where i would close all shorts..no questions asked... becasue then i see 5400 on nifty..!!!

Lee said...

Sachin. Thanks.

You are obviously a better trader that I.

Remember, I post here everyday almost real time..putting my a$$ on the line. Sometimes it obviously makes me look like a fool..doesnt it? And likewise many other who do post realtime. Someone who does not do that will unfortunately never understand.

But then, I have also made some awesome calls over here since I started reposting..I am sure nobody can deny that.

I take a view point. I stand by it. See I always said I am going to start being bullish by October end right? That is all I did even now. Where did I drastically change my view? Only the extent of downside - this is only what I changed. Sure I expect we will get some backing and filling over next couple of weeks but somehow doubt it will break earlier lows. Above 5235, 5500 will come for sure.

Best,
Lee

bharat said...

lol... its definitely not hitting 4000 before diwali unless we see a lower circuit... :P the market spooks us all again...
btw, well said lee... time to start buying now ;)

kaps said...

Its a Juggle out there right now.I am likely wrong on timeframe about 5500 on Nifty by Diwali.But Nifty to be in uptrend till around early-mid november,so highs(5500+) should come around that.If Nifty doesn't cross 5250 on daily/weekly basis next week, then this is confirmation of above scenario to me.

Sachin said...

You are a better trader then i am .. thats for sure.. i dont trade all the time..just for the sake of trading.. i do maybe 4-5 trades per month in bulk..when i become sure on time cycle.. channels.. retracements.

But i never frontload options.. i never go against what chart has not shown me..you see the steep slope on the 80 week cycle.. ?? its way to sttep and since its a major component it will show its color maybe by October end or first week of november..

By internals what do you mean? Which indicators are you talking about? It would be great if you can throw more light on this?

P.S: i am not here to ridicule your way of trading in anywyas..but again, i dont support everything written and said. We are here to disagree and agree.. aren't we? :) :) :) :)


Cheers!!

Sachin said...

And also, its a good time to buy in deliveries.. because you cannnot buy everytihng on one day.. every stock has its own charateristics.. and is already bottomoing out.. there are so many stocks which are already bottomed out.. so picking and start buying in small quantities is good.. i have started doing that..already