5 week low is probably in

Yeah I know. Sucks doesnt it? Holidays in our market..And then the GAP from HELL when we reopen..LOL..I have always wondered why we dont have futures trading after hours. Kinda sucks when all the US markets have derivatives of our indexes and stocks. Kind of dumb if you ask me. But its what we have to work with right now.

Market will always throw us curve balls and bouncers. That is the aim of the market. To separate you from your money.

So looks like a big gap up today. I alluded to this possibility a couple of times in earlier posts. I.E that the 5 week low might be in. This is one reason why I covered shorts on that day I missed the 100 point downswing. Yes it happens. I tend to get these intuitions and signals a few days early. I had a feeling the 5 week low was coming in that day which is why I covered the shorts. What use? :) Still went and entered some shorts past 2 trading days. Nowhere fully as before covering but still around 40-50% short. Still the very good thing here is because of this conflict in my mind, I hedged up nicely..almost too much I think..So today's possible big gap will not injure me..maybe slightly. So I cannot complain.

Updated Hurst Chart -



Ok I mentioned in the last post that it is possible, the 5 week low has already come in. And this chart kind of puts lot of evidence to this view. I earlier thought the 5 week low might come in the Oct 10-14th timeframe as I had posted before. BUT when we talk about lows and cycles we need to give some allowance to the timeframe. So it looks like the 5 week low might have come in on Oct 4th. Ok now coming to possible upside from this low. Remember, this is the last 5 week cycle, so its a bearish cycle. So this is still a bear bounce. Quick and sharp. But it will also quickly roll over. Need to wait for it thought. Price points are 4910-4950 and 5030 levels. One of this areas should provide the rollover and return to downtrend. Before that we have 4860. So lot of points but short covering in atleast first few hours will happen, after which we might get back to the trend.

I think until next week mid. Oct 12th i.e, we might not see major downmoves and will be in a corrective sequence..i.e an ABC move..So A might complete today, B down will come and then maybe a weak C..I feel it might not get above 5030 level for this full corrective move. We shall wait and see.

Another thing what this new evidence does to us is it puts the 80 week low that we were expecting in Nov mid to come a bit early maybe in the Oct end timeframe to Nov 1st timeframe. So need to watch out for that. Either way since we are so close to a major low, caution is advised on bearish positions and we need to start looking for evidence of a more sustainable longer term low very soon.

I will post updates. I have some shorts. I might close them on opening and just keep the hedges I have. This in itself will put me in profit. Have some puts and NF shorts and more than 150% hedges on them because everything was uncertain. So will close/play with them accordingly.

EDITS:

1. 10:00AM Update - Covered all shorts at open. Holding the hedges which are in good profit right now.

2. 11:30AM Update - Covering the hedges..And slowly building into shorts..I might keep some higher hedges just in case. Just remember I think the bounce can go up to the Oct 12th timeframe.


Best,
Lee

No Update Today

Very tired..Going to sleep early. I will try and put up a detailed post tomorrow. Position update is short(40% only) - I plan to hedge today and also add to the shorts over time. I am expecting some sort of possible bounce(small chance only but it is out there) over next few days(did the 5 week low come in early?)..And then the downtrend to resume heavily. Not sure on this as I havent done any analysis yet. Will do so tomorrow.

Best,
Lee

Not Much..

...of an update today..Same as yesterday..Looks like market is trying to bounce..However I really doubt it gets much far in this bounce..4900 is a good point to watch..If it gets there..And if it can sustain for atleast 1 hourly close. Till then downside risks remain and risk reward favours shorts. Remember we are trying to build a bottom but until we do so...Sudden downside moves will keep coming in..Atleast until the 5 week low expected in Oct mid and the 80 week low expected in Nov 1st/2nd week.

EDITS:
1. I am covering some shorts here to reduce risk..and also like I mentioned before to sleep well..It removes lot of pressure to book some profits and let the rest ride..And if market does bounce back from here, we can always add back them shorts. Still short in the range of 60% or so. Whatever I booked now are shorts from the 5000 area - so excellent profits also.

2. Not sure anymore..Today's action is quite uninspiring from a bearish perspective. I am reducing shorts even more to just a bare bare minimum(just token position) at around 4840..Earlier shorts were cut at around 4830 and below. For now market is looking strong. I will readd based on market action tomorrow. Going to bed.

3. Gotta love it. Has it topped for today? I am readding shorts again..But in a very phased manner. I want to have shorting power till 4950-5000 or so. So going slow and steady. Started from 4860 NF.

4. Definitely not looking like it wants to hold 4860NF..Added some more when we got there just now..Market not letting me sleep!

5. Stopping out again on the shorts since its sustaining above 4860..Shoulda gone slept lol..Will come back tomorrow fresh!

6. LOL this is too much...As soon as I cut the shorts, market goes down :(
Yeah I got up just for this..Shorting back in slowly on this pullback. Gotta love the market though for the conditioning it does.


Best,
Lee

The Next Two Weeks

So last week was quite a tumultuous week with expiry also thrown in. I have posted my thoughts on expiry in earlier posts. There is no doubt that some kind of manipulation always comes in on expiry which will throw us off.

So now we are back to the trend which is down. Important price levels are at 4900 which I have been saying for a while. Break this and interest goes down to 4800 which we should do today. Break of this and a 3rd test of 4720 is assured and we should break that this time. Bottom line is I believe the past few weeks consolidation and breakdown level of 5200 test is complete and we will break 4720 soon.



As you can see from the chart 4720 is an important support cluster. More accurately 4720-4675 level is support. Break of this and a test of lower levels like 4400 will be on the radar. One step at a time.

Hurst wise, the Oct 10-14th timeframe should give us the 5 week low. And I expect this to be a very very weak low being the last one in this cycle. We might have a couple of days bounce from there before continuing along the primary trend into our 80 week low. Expected Nov mid timeframe. Again lets go one step at a time.





I shorted last Friday..Not fully but ok enough. So today if we gap down heavily it might not be a great time to add to shorts but we should have bounces which will give us that. Will post updates.

I will do a long term post sometime within the next few weeks. Because we are getting closer to an important low which should offer some safe tradable opportunities on the long side for several months.

EDIT:
1. Is that a bearish island formed on the charts? I can see it on the intraday chart on Ilango's site. If so, the its going to be bad for the bulls for the next few weeks I feel. For now a bounce seems to be on. Use this bounce to build into shorts if not already short..If already short, then can add a bit more which is what I will be doing.

Best,
Lee

Expiry Sucks!

Well what can I say..expiry really does suck and throws us off our game. I wanted to do a more detailed post yesterday before market opened but could not due to other committments. Anyhow like I posted yesterday at around market open, I kept on adding shorts throughout the day. And got an average price of around 4995. So not bad for a days work. Also got into Oct 4900 Puts. Overall size is not as great as I would have liked - around 75% short. I could have gotten more in but wanted to wait and watch a little.

Coming to expiry. All my observations were correct but this is what expiry does. Option players are the big guys..In the end, market will end up where they want it to be. When we started taking off above 4940, I started covering as I outlined in earlier post until I had just a little left..So I closed that also..Overall got out around 4950-60. So all in all not a bad thing since got to reshort again higher.

There were several important signs on expiry day.
One is the rupee still went weaker.
FIIs still sold.
Advance decline numbers were poor - showing that just few stocks pushed up.
And still market went up.
These were all signs that Friday would be weak. I wanted to outline all these before market open but didnt get time. Still thought I would mention now.

And really above were the reasons I shorted back into the market in the 5000 range. All in all a decent week. We shall review some charts and setups over the weekend.

Have a good weekend!

Best,
Lee

New Shorts

Not much of an update today. All relevant charts are there in last post. Today as per my last comment in last post, I am building shorts from open till now both NF and 4900 PUTS.

Best,
Lee

Top in?

I really think so. For this particular move. There are various portions of evidence supporting it. I think unless we manage to get above the 5030-5050 range, I think it makes sense to sell all rallies. And cover on declines partially to reduce cost.
Today we should see sub 4900 for atleast some time. Whether we can stay there is the question. If we can, then below 4870, we can see more declines.
If we get to 4720 area this time, I do not think it will hold. We will slice through it and the next level to respect would be 4650. Still once step at a time. Its always easy to think oh we are going to 4650, 4200 etc or even 5500, 5700 and sit on a losing position. Take one day at a time.

OK enough of today's rant :)

Coming to markets, like I said, 4870 level is crucial. And above 5030-5050 level. In between kind of no mans land but still lot of opportunities to go in and out to get a better price on your positions. This is important. I mean if you are in profit, just book 1/3rd of position. Hold the rest. While this reduces your profit potential, it is a great psychological boost - to hold the rest of the position until target. And as it gets closer to target, cover one more 1/3rd. Then ride the rest of it. I cant tell you how much of a difference this makes!

OK thats it I promise :)

So I did cover a little yesterday..might just sit tight today or cover a little bit more..Reasons are as given above. Just balancing. Rallies will come to re-add back.

First the cycles chart -



Ok next a normal chart look. I have commented on the chart this time -



Another look. This is interesting. This is the Nifty Dollar Index - Defty - Are you able to spot whats interesting?



The DEFTY had already broken the lows corresponding to 4720 on Nifty. So basically the Nifty in Dollar terms is much more bearish that Nifty in Rupee terms. So what do you think FIIs are doing or will be doing? Think about it a little.

Ok thats it. Trade Safe!

If I do anything today, I will post. One thing I didnt post yesterday was that I reentered by NOV 4700 PUTS that I was trading with on the last big fall. I had sold them to buy back and I did that yesterday in preparation for the next leg down.

I also posted some comments in earlier post(s) - you may read them if you missed since I think some good info is there.

EDITS:

1. Not exactly sure what is going on. So stopping out of several of my shorts. Covered few in the morning like I mentioned I might. And rest at around 4936. Better be safe than sorry and live to fight another day. Unfortunately too much of news is coming out tomorrow..so another wild card. Probably around 40-50% short now. Above 5030 something else is happening so will likely stop out fully. Shall wait and watch.

2. Wow..that was some spike..toned down on shorts again..When in doubt better to stay out or reduce exposure..Maybe around 20% short only now. Will reevaluate tomorrow. Yeah I know I might regret this tomorrow..But still better safe than sorry.

3. Dont know. I am out fully. Hope the market does not crash tomorrow. Will reevaluate and come back. For now, bulls look very strong. Expiry sucks! :)



Best,
Lee

Quick Update

Ok..now I suppose everyone is feeling slightly to raving mad bullish and not at all bearish..cursing themselves for taking those short positions hehe..Its good. This is how everyone is feeling..and is a natural cycle of market psychology nothing else.

So as I mentioned..Options were disintegrating yesterday so I covered them all..I had OCT PUTS...did not want to hold against the obvious decay in price and this turned out to be a good decision.

SO...I am holding shorts today..October NF..hedged with 5000 calls which I entered yesterday around 17-18. Its 33 right now. So it offered me some sort of protection. Not much but something. And also in these kind of situations, I hedge at the ratio of more than 1:1..Means if I have 2 lots NF short, I might have 3 or 4 lots Options 5000 call long..This is because of deltas. A google can help you understand this better. I am not the best person to explain.

So coming to the crux of the matter, I dont think we are entering a new bull move. This is just a squeeze of the shorts. And this is the same game thats played always..over and over again. Once all the shorts have covered or have been squeezed, the next move down will start. Is it ready? Are we there yet? Maybe..But definitely close.I will be trading today according to this principle.

Updates will follow with charts. Havent got a chance to look or analyse them yet.

EDIT:

1. If you have been trading/adding short like me since morning, now maybe a good time to take some off just to be on safe side and also to reduce shorts cost. I have done this and will be going offline in a little while.


Best,
Lee

Bounce back continues..

Sorry for the late update guys..dont have anything more to say from yesterday or from what I posted comments section yesterday - If you missed it, I would urge you to read it now.

Anyhow I am shorting into these levels here. I dont know if it can clear 5050 but I think until it does so, downside pressure remains. Take it for what its worth. You know my bias. 4925 upward till 5050 are good areas to short gradually.

EDITS:

1. I have to mention..I have closed all my NIFTY PUTS at a loss of around 25%(just quantifying the loss on the option values alone - if you look at my full account, this is just maybe 0.5% loss or less. Its all about money management..which is why I mentioned before its not about being a rockstar or owning the world in a few days..just to make profits consistently - Anyone who is a full time trader or experienced trader will understand what I am talking about here...Atleast I hope so.). Full disclosure - Just mentioning openly. I mentioned my profits so mentioning my losses. I am closing all options today. I do not know. This is going too fast and too strong for now. Still holding my NF shorts and earlier updates still stand. Remember - do not trade beyond what you are comfortable on.

2. Just wanted to be clear here - Reason I closed PUTs is coz of time and time alone. Options always have a clear expiry date. Cannot hold hoping for something - similar to holding some milk close to expiry date lol. What I wanted did not come, so closed..Nothing else. After I closed I have been adding nicely in Futures(OCT) with hedges on 5000 calls. Coz I am still bearish.


Best,
Lee

Market Update - Sept 26th

So back refreshed for another new week of battle :)

Last week was an excellent week for me as you can see from the posts. So it was a nice weekend off away from the market without having to worry about any open positions. And I think it was a good decision on my side - got almost low tick and almost the absolute bottom to cover the shorts. And maybe today we will get a rally to start re-initiating shorts.

I want to be clear on this. Re-initiate does not mean all in at once. I will go in small increments so as to reduce risk and also hedge a little so that if the market moves up some 100 points extra than what I expect, I will still be ok. OK - so the shorting range is around 4950+or-25 points - can use your own discretion. Also maybe hedge with 5000 calls. Will get rid of this as the situation arises - will post updates. Thats the plan for now. Still bearish for now. This will be just a dead cat bounce in my viewpoint. The 5 week low is expected in the October 1st week timeframe. So maybe around Oct 7th plus or minus a few days. Will tone down on bearish positions before that. But till then the downside pressure should be on. After that another dead cat bounce.

As I have preaching for some time, the 80week(4.5 and 9 year) nest of lows is going to come in November mid timeframe only. Till then its a bear only punctuated with bear rallies. If something changes in this view point which I think is unlikely, I will alert in advance.

Now price targets - I generally dont like to do this. Because it ties up our mind in one expectation. But still a wild guess for me would be around 4400/4500 for the 5 week low and lower that than for the major 80 week low. Still one day at the time. Dont want to go with targets. Will go with my timing model. If price also works out, then great.

Charts below. Just in a picture what I wrote about above.


http://www.sentienttrader.com/

So like I was saying the last major low at 4720 was likely a 10 week low(this software shows it as 20week but I think this is unlikely), and then the 2.5 week low came at 4911 on Sept 13th. So we are now 28days along the 10 week low and 10days along the 2.5week. The software is expecting the 5 week low around Oct14th(I think it will come in earlier because the 2.5week low came in early). Also the 80week low is showing as expected in last week of November(maybe might come earlier as I mentioned above but bit early to say right now). Just explaining so you can understand better what is shown in the chart. If you have questions, please shoot.

There are also some good comments in the previous 2 posts. You may read if interested.

Ok there were some questions on the Hurst material. I have mentioned before. Its not for the faint of heart and its expensive as well. But if you are really interested and really dedicated -

https://www.traderspress.com/detail.php?PKey=99

Alternatively, read what I write here and try to understand for yourself. There is another book that Hurst wrote initially - I will not recommend this one. Its confusing and Hurst wrote it when he just started developing this concept. The above link is best if you are interested and dedicated. Its not going to be easy.

Also here is the Jessie Livermore Audiobook I had promised. Download when you can. I will deactivate the link in few days -

Reminiscences of a Stock Operator - Edwin Lefevre.rar

One more thing - please refrain from asking me about your specific trades. I will not answer. I think I am providing more than enough thoughts and guidance here to be able to figure out for yourself what to do.

One question to readers - Whats the feedback on ZERODHA if anyone is using? Indiabulls is really eating into my profits because of brokerage. Really eating.

Okay - updates later during trading day. As I tried to explain above, my aim will be create shorts as much as possible toward the 5000 area. If we can get close enough.

EDITS:

1. Hope everyone shorted atleast partially at open..I just started a round(20%) at around 4872 NIFTY OCT FUTURES. Will add if we go higher. Also a small round of OCT PUTS 4800. Hedged with 4900 calls of current month.

2. Continuing to add as we go lower..boths PUTS and FUTS..I might go up to 75% allocation for now provided we do not break back above 4850 on spot. Looking very weak to be frank!

3. Trading trading, enjoying ;) Lots of shorts taken from 4870 down to 4840..now covered 50% at around 4765....Will add back as we go up..Keep trading to reduce cost..No longs at all for now..My view..just my view..you are always welcome to do hit and runs!...enjoy ;)


Best,
Lee

Staircase UP..Elevator DOWN...

Thats it. Nothing else can describe past few weeks move. Just in one day, gains of several days were wiped out..In a few hours infact.

I just wanted to put up a quick update before going out. Once I am back I will add more details and charts as well.

Now, as I mentioned, I covered 25-30% of shorts..covered a bit more also but couldnt post. Idea was just to be safer - and also its a psychological thing. Once you cover few, you reduce your cost and things become much more easier on you. Thats what I did and slept very nicely.

So now, today a gap down open is very likely..And I expect over next few days we MIGHT try to consolidate here before breaking the 4800 level - After which we should see another free fall. I think the market might give one more opportunity to others to get short again over next 2-3 days. This is what I think. However I would never recommend going long. Shorts can either sit tight. Or part book and wait for more opportunities. The next major low is only around Oct 1st/Sep 30th timeframe. So there are quite a few more days before any sort of good playable bounce can happen - Unless ofcourse you do intraday hit and runs.

This has been an awesome trading environment. And Hurst has helped me a lot. I want to thank everyone for their comments in the earlier post - it means a lot to me. I have also replied over there to everyone..So dont miss it.

EDITS:

1. A very quick update..covered 10% more shorts and hedged the rest with 4900 calls..so now only 50%(or less) short. I will post more on this psychology later. Should have mentioned price.I did this around 4854.

2. Ok Folks. I think action so far tells us it might be a quite day - I mean relatively - i.e we might not break 4800 today. As I said before and consolidation move for a few days. Look at the fractal posted somewhere before and you can see this. Market needs to digest this move. Without that, it cannot move lower..Or even higher for that matter..You know my bias ;)

3. I dont know guys..I am taking profits here in this area on almost all shorts. 4825 Nifty. The profits are too much to ignore. So I am booking here to refresh and come back. Its good to do that. As I said I do not think it will break 4800 today. If it does, there its another quick elevator ride down to 4700 area and lower. So I dont know. I want to relax a little and take my profits - well earned I think. We will come back with a fresh mind tomorrow.

4. Oh yeah for the record. My trades since I closed them and also since I was talking about these for a while -

- Nifty Futures short from 5150(higher due to trading but for the record lets take this figure) down to 4825.

- Nov 4700 PUTS from 100 up to 205 today.

Yeah I will sleep good and relaxed today..Totally FLAT ;) Let the market crash without me if it wants to LOL.

Happy and Safe trading to all!


Best,
Lee

AND we're there!

Most Probably Yes..Action in US markets today was very clear. Almost half of the uptrend was wiped out within less than couple of hours.

I had been calling for past 2 days or so for 5150-5180 to top out this current upmove and for the next big wave down to start. In Hurst terms, for the 2.5, 5 and 10 week cycles to top out and the next big move down to start into the expected November lows(with a small pause October 1st timeframe).

So likely we started that yesterday.

Now price - Like I have been saying. 5000 first needs to break. Then 4900. Then only we can confidently say we are going to break the 4740 area also. But you know what my bias is :)

So I am short..probably too much..So as usual, I will book some as we go lower..And ofcourse then ride the rest...Hopefully into the abyss.

I am surprised guys..no comments around here..Is it that you dont understand what I am saying? If so, maybe I need to revisit the way I present things..OR is it that you fully agree with my analysis and dont want to comment and add anything more? :)
Or is it that you fully disagree with what I am saying..And dont want to argue with a crazy raving madman speaking gibberish..lol :D Well whatever it is, I always appreciate comments guys..Even if I dont reply directly, I appreciate it and if its a question, I always try to address it in upcoming posts - The last few posts are clear examples.

Ok nevertheless, back to business. A small note about cycles. Its funny. If this same news had come out lets say at a different point of time, the market would not have reacted this way. If you think about it, there was no need for such a big selloff but that is where cyclic pressures come into play and exert themselves. Bottomline is we dont need to worry about any news events. I was calling for a big top for past 2-3 days just like I called for a bottom around a week back.

Same ol game. Just need to be able to read it accurately and MORE IMPORTANTLY, be positioned for it in the right way with least amount of risk.

Wish you all a profitable trading day..And expect a bounce back from some level today..most likely around the 5080/5050 area if we can get there. If that doesnt hold, then 5000.

And as always, comments are welcome!

OH and EDIT: One thing more - the fractal I posted yesterday. Looks like its playing out. If so, close down the hatches - we are in for a bumpy ride down. Those who know me from 2007/08 know the amazing fractal I posted and traded at that time. This also has the potential to be something quite spectacular. Wait and watch. And as always trade safe!

One more thing is the USDINR pair - I was telling all my friends when we were at 42.XX that this is going to 48.XX first stop and probably above 50.XX soon. I think the call is already justified. Right now IT is rallying anticipating increase in profits but sooner or later a mean reversion will happen there are well..As I said, wait and watch. And dont forget to take profits periodically.

EDIT:

1. Booked around 25% shorts..Just to be on safe side. And also to sleep sound. Now my effective short price is way above 5200 - so I am safe for now. Its just good trade and money management. Cannot afford to be greedy in this profession.

2. Hmmnn...ever since I covered a portion, market seems to be building a base for a small move higher. So expect this. Maybe 5080 or 5050? Possible but I think not worth playing for - the big move is still short and stay short. But if you want to, covering here and reshorting higher might be prudent if you are awake and trading. I on the other hand dont have such luxuries. So I will sit tight.

Jesse Livermore once said "After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting"

Will go to sleep and see tomorrow what happens. Whatever it is my avg short price is way above 5200 like I mentioned due to trading and covering some portion right now. So I will hold. Wait and watch. I think this is JUST the TRAILER. Full movie will be released soon ;)

3. WOWZA..so much for the so called 'bounce'..LOL..Bye goodnight going to sleep..Still short and strong. ;)


Best,
Lee

Are we there yet?

I think so. If not, then close. Sorry I couldnt give an update yesterday..somehow got pretty busy :)

So yesterday..no denying it..Was very strong. Almost unbelievably strong. BUT now we are bang into the resistance or supply zone. I will be watching very interestingly over the next few days to see how the market reacts here. I think this is a very critical juncture here. Be very clear about this - I have been saying for a while we can get into the 5150-5180 zone and thats what we did yesterday. Honestly I did not expect this to happen yesterday but thats what happened. I had been saying for a while I will trade my shorts intraday to reduce cost and thats pretty much what I did yesterday - not an ideal situation but need to work with what we have.

So now we are in the topping range. As long as we do not get a strong close above 5200-5220, I will remain bearish and continue to trade like that. However a close above this and holding above this, we will have to admit something else is going on. But lets see. I think next few days should give us a concrete resolution.

I know its tough at times like this to hold the fort and trade believing in yourself. But need to do that. I know it was tough for me. But after a lot of study today, I see nothing to change my plans or ideas or market outlook. Still believe we are topping working for the next move down. But close above 5220, I will have to admit I am wrong. We shall see.

If you are not comfortable trading, my advice is - sit out for the next 2 months or so till November mid when we will be buying into some good stocks. This is safe to say the truth considering all the unknowns out there. But if you are into trading, then I would say these are one of the best times to be trading intraday and for a few days purely hit and run irrespective of whether long or short.

OK a look at a chart. I am not posting the Hurst charts because nothing has changed from last time. I.E topping for this current 2.5, 5 and 10 week cycle before the next move into first the 5 week bottom expected b/w Sep end and Oct 5th or so. And then a bounce before the final move into November 1st week. Rough guidelines for now..But we will refine.

Chart -



Ok I posted this a little while back mentioning its a probable fractal for the market. Looking at it right now, it has done exactly as projected - so likely we are closer to a top than ever. You can compare each move within the circles to verify whether what I am saying is correct. We shall see what the market says though!

Best,
Lee

A Look at US Markets - SPX

Been promising for a while that I will post my analysis and phasing on the US markets. So here it is - I have presented SPX here instead of DOW - I somehow have been following that index for a long time rather than DOW or NASDAQ.

Anyhow here is first a very long term look. Its a monthly chart.



You can see the longer term cycles here - First 9 year nest of lows shown here is in April of 1994. Next 9 year nest in March 2003. And now the next 9 year nest of lows sometime toward Dec end of this year? There is always a chance it can come a little bit later. Jan or Feb? This being such an important low chances are there it will extend.

Now I have been mentioning for a while that our Indian market lows will likely come in November 1st week because we have been leading the US market by few weeks. I think by around 7.5 weeks or so. This will also be similar to Oct end 2008/Mar 9th 2009 lows where we bottomed ahead of the US markets. But looks like the gap has reduced considerably right now :)

Anyhow now a look at the shorter timeframe.



The last 18 month nest of lows came in June end. And the last 40 week low came in March mid timeframe. And the last 20 week low came on August 9th. Right now we are in the last 20 week cycle within this 80 week cycle and also with the 4.5 and 9 year cycles. Timeframe for the projected 9 year nest of lows shows as around the last week of Dec. But it may extend also. Will see as we get closer.

A bit more of a closer look.



Monday 12th Sept likely made the first 5th week low within this last 20 week cycle and we had a good rally out of it. This is also the same timeframe that the Indian markets made the 2.5 week low. So we are just 1 week out of the 5 week low in SPX. So still quite early but likely we are closer to a top in both this 5week cycle and possibly the 10 week and 20 week cycles.

=====================================================================================
An update on the Indian market -

As mentioned before, we got the first 2.5 week cycle low last week Monday/Tuesday in this last 10 week cycle before a major low which expected in November mid timeframe. This 2.5 week cycle has run around 1 week now so we are in the topping region. And likely it will also be the top for this 5 week and 10 week cycles. The only question is - Have we topped already?

I think its a very high probability that we might have. If we havent then we might have one more push higher into the 5150-5180 range. As I mentioned before stops for shorts have to be somewhere in the 5200 area. If we push above it, have to accept its going much higher. But for now, lets go with the assumption that we have topped or are going to this week.

This week and the next has the potential to become very bad very quickly - the way I see it. But still lets go with levels. First 5000 has to break for the bearish case. Then the 2.5 week lows has to break next at around 4900. If both of these are done, then we can safely assume that this thing is cooked and we will soon go below the 4750 lows as well. But take a deep breath..and lets go one step at a time.

Friday was quite a whipsaw day..Got whipped a bit on my positions but still held on to most of the shorts I had with some exits and re-entries. Might reduce some today if there is some weakness just to reduce basis costs. I think I already mentioned that I have been scaling into 4700 NOV PUTS. Still have been doing that little by little. NF shorts have been trying to trade in them to reduce basis cost...Will continue to do the same intraday as long as we remain in this range.

Best,
Lee

Upside pressure

So the 2.5week low came and went by. So what we are seeing right now is intense upside pressure. I could have traded this much better in hindsight but I have to deal with things as it is right now. Frankly when talking from a trading perspective, we need to always go with our gut. But once a wrong decision is made, its tough to backout to the right trade.

Frankly, the last 2 weeks before this one were probably one of the best in my trading life. But last week was bad. The point is that I had the tools but chose not to trade according to that.

Most websites like mine will say they knocked the ball out for sixer..they will rarely tell you that they made a booger trade. But I am saying that past few days, I did that...Could have done much much better.But hindsight is always 20/20. I dont believe in that. So that last/this week was bad - I ll say - but still its just 30% of the profits I made couple of weeks before that.

I am not superhuman..just plain human like you guys..so a loss is a loss. Need to deal with it. Above 5050 yesterday, I stopped out lot of shorts. but still have quite a few. So need to deal with it today.

Its also the RBI day. And I frankly think the news will be a non event unless these guys do something very very extreme. Right now its 25bps or nothing. I think either of these and market expecting this..so its likely to consolidate. If they cut..which I think is unlikely, we might have a spike out!

Ok coming to price levels. 5180-5200. This should be stops for shorts. Above this, it can go much higher. But it will still fail later. But we need to respect it. We shall see how things turn out today.

Best,
Lee

2.5 Week low confirmed

No other way to read it now. Looks like we confirmed the 2.5 week low at around 4900 - This also came up in the timeframe I was expecting - Wednesday/Thursday. So its done now.

What next? We will likely rally for the next few days - until we get to a top for the 5 week cycle. And then again decline down into the 5 week low expected toward end of this month. Wild card is how high we can rally in this current bounce up. Will it be a double top? Will it stall in 5080 range? Will it get to 5175? Lot of questions but no way to know for sure. We have to observe market action for next few days.

Either way it looks like it would have prudent to atleast take off 50% of my shorts yesterday near 4900 - I was expecting the low - So could have definitely reduced the risk. Problems with having to trade at odd hours in the night. Well its done now. I have double hedges in place for the futures but the puts might lose some value today. So not quite sure how to handle. I might just close all and try scalping intraday until I see opportunity to put the shorts back on. Very fluid here right now - need to see how the trading day goes. Will update here.

Charts with a few more clues below -






EDITS:

1. Well I dont know. I expected a better performance today. Not to be. So it bounced but quickly went down. SO..Who knows. I think its better to go by levels..So 5040, above that 5150-5180. I think better to think about shorting in these areas. The Indian market is turning into a great deceiver nowadays lol. If world is up, India goes down and vice versa.
I covered lot of shorts initially..and then put them back on..so essentially still a status quo. I hate it..really hate it..but dont know what else to do. Lets see if this guy can trade above 5050. If it does, then I might cover some shorts. Right now looks damn weak. I will offer some more thoughts around this psychology tomorrow.

Best,
Lee

Quick Update

Just a quick update - I am sorry didnt update anything till now..was busy..anyhow whatever I updated before in posts and comments still stand. We are trying to bottom for a 2.5 week low but this is ofcourse bound to be weak being so late within the bearish cycles SO whatever rallies comes, it will be short lived and we will go down toward the 80 week lows expected beginning of November timeframe. I have given more details in my earlier post - dont want to repeat them here.

Rangebound action is what we are seeing right now. 4900 needs to break for bearish case and 5040 and then 5175 needs to break for bullish cases. I think by this itself you can understand which case is stronger. My bias is also very clear I hope.

Trade Safe.

EDITS:

I am maintaining a status quo for today. Basically not doing anything from yesterday. Am short heavily but also have hedges in Nifty futures. Probably only a matter of time before we break below 4900-4875. Then it might be a bear party.

Best,
Lee

Minor Squeeze might be ON - Is the 2.5 week low in?

So market took support at around the 4900-4920 area I mentioned yesterday in the final comments and bounced from there. Today this should continue for atleast a little bit in an effort to squeeze out some of the late shorts. Dont be fooled by this. Always remember the larger term trend is down and all longs should be hit and run affairs - Intraday longs only is best.

From a cycles perspective, it looks like the 2.5 week low came in early - this was always a possibility - one of the reasons I reduced on shorts yesterday/booked profits and also hedged the rest. I had mentioned this clearly in the comments and the edits section. With yesterday's trading day, we have run approximately 15 days in this cycle off of the 10 week low which also translates to 2.14 weeks - Close enough for government work. Lows can come early especially in very uncertain situations in the geopolitical front as we are seeing today.

5080 area on the upside - Might not even manage to get there - this is what we need to watch today and also next few days. I will be watching closely to see where I can reestablish the covered shorts. But initially I might cover some more at the open to re-add later. But not sure. I will update on the edits sections if I do anything. As of now almost double hedged and also covered more than 50% of the puts. Still have opportunity to reduce and re-add higher. We shall see how it turns out.

2.5 week, 5 week, 10 week - These are the cycles running right now in this 80 week cycle before we bottom in Oct end/Nov mid timeframe. The tops of all of these might have already come together last week at 5175 odd. But there is always the chance of the 5 week top coming in which could be a double top or a lower top at 5125 odd. Keep your thoughts and options open. If the market decides to rally from here, I expect it will still top out in few days which will be the 5 week top and we shall go down toward Sept end for the 5 week low. If we bottomed the 2.5 week cycle yesterday, calculate 2.5 weeks more to get the projected 5 week low - this gives approx Sept 27-29th timeframe for the 5 week low - You may calculate this for yourself and see how it works out. From here, you can also easily project the next 5 week cycle and so on - This is the basic tenet of the Hurst Method! So we are in the first 2.5 week cycle of this 10 week cycle. We will have 3 such 2.5 week cycles left. Calculate it and you will get approx Nov 2nd for the 10 week low, the 20 week low, the 40 week low and also the 80 week low. Also quite possibly the 4.5 year and 9 year lows - as I have explained before. If you want to understand this better, read and reread it again and ask questions if you need any clarifications.

EW wise, if the corrective is still running and what we saw recently was just the 'b' of the C wave, then more upside is pending toward maybe a double top kind of situation. Its quite possible and so we need to be open toward it. The preferred count is ofcourse that we have completed some sort of motive move down and we are now correcting it. So more hard down should come after a small corrective rally - This is obviously what I prefer bounces or not.

But whatever happens with short term bounces, the medium term mantra should be to short the rallies because downside pressure will be there until the Nov low which is expected by Hurst methodology. In between this we will have some intermediate lows as I have outlined above.

EDITS:

1. Added back some shorts here...I had covered a few lots at the lows of the morning and the rest what I had covered yesterday. Also rolled up hedges from 5000 calls to 5100 calls. Moving to more of a bearish allocation. Lets see..Can we get to 5025? 5050? Looks quite weak for now.

Best,
Lee

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

Topping Process

I can only view this current market action as a topping process. Nothing else. As I have been saying for a while 5200-5250 is rock solid. Can we do a little more than that? Yes possible. Probably around 5300 and above is when we need to reverse to fully bullish. Till then sell the rallies is the mantra for now.

I did enter some shorts yesterday. I will add today and continue to add as long as market remains below 5250. One thing I will say - The way I operate is I keep my initial positions very very low. And add as the situation arises - this may be break of certain pivot levels or it may be on rallies toward certain point on negative divergences. Setting a position is not easy and almost is never popular - because we are always going against the grain. I mean to say a short term trend follower thinks everything is quite bullish now. But a longer term guy says this is just a bounce in the downtrend. So a conflict arises. It ALWAYS about timeframe. As a trader we always need to decide what is our timeframe. Different people are comfortable is different timeframes. Has to do with your frequency and timeframe. Find that out and you will be so much more in sync with your trading.

So many people emailed me around learning Hurst methodology. What I will do is over next few weeks is probably present some material around that because I know its very expensive to learn this by yourself. What I will suggest is going back and looking at some of my earlier posts first..I mean to say there is one called 'backup from VFM' sometime this year probably couple of months back. Start from there and few posts after that. Then from next few weeks I will post more around learning and understanding this. Please understand this is not a simple thing for me to do. So it will take some time. But I will still do it.

Trade safe. Keep emotions out. Run your trading like a business.

Best,
Lee