Wednesday

I have been very happy with the way FLDs have been working so far. I have explained about FLD's in earlier posts in detail - Keerthi please read the post I did on Sunday night with the charts. I have tried to make it as detailed as possible and also with examples so anyone can understand.

Pilot, 80 week lows, even though we dont have 100% confirmation yet, I think its very high probability we did set the low at 4650 odd. However how long this low will hold is another story. I did do posts earlier on this speculation recently. Hope you did not miss it.

Chandra, if it is the 80 week low, we will have upside - yes - but it does not have to happen very very fast. There will be backing and filling so form a good base. See Oct 2008 - Mar 2009 period to see what I mean. 2nd thing about FLDs..see its a cascade, this is why I was sticking with the 5050 target from beginning. See FLD cross, projects next cross, then that cross projects next cross and so on. So based on my rough calculation, I came up with those levels i.e if we close 4770, its extreme high probability that we get to 5050 with some resistance expected in b/w at 4850 area. This was shifted down from 4865 to 4845 as the FLD lines came down.

The formation of FLDs I described above is called an FLD cascade and it basically projects a good upside in the method I explained above. One by one.

Here is a look at the current view. As you can see, we are at the next FLD cross. So basically it is crossing today at 16100 Sensex (around Nifty 4830). Bottom at 15500. So difference is around 600 points = Approx 200 Nifty points. So adding this to 4830, we get 5030. So 5030-5050 is the current projection for the 2.5week FLD.



Now the market has run around 7 calendar days from the 4650 low. So we need to start looking out for the 2.5 week cycle now. I think we will top in the next 2 or 3 days and then maybe try a consolidation move into the 2.5 week low - this is however not likely to be a major low - we might try to consolidate at around 4850 area - in effect test this area from above. All speculation for now. For now we have the FLD outstanding target of 5030-5050. Then we see.

I might book profits today atleast partially and re-hedge the rest just to be on safe side.

Best,
Lee

FLDs

Hope you guys have been watching the power of FLDs. I mentioned in last update 4865-4875 needs to be cleared for higher targets of 5050 and little higher. Market reversed exactly at 4865 yesterday. One reason I booked some profits at 4850 as updated and tried to buy back lower.

Anyhow for today, looks like if we clear 4840-4850, we are looking at a 2.5 week FLD cross which will generate a target of 5050+...Wait and watch..I think trading with FLDs have been going well..so far.

I will reply to comments later...

Best,
Lee

4850

Well yesterdays FLD call turned out to be a very accurate one. 4770 to 4850 - not a bad little trade. But it might just be the beginning in this little upmove. Today we are facing resistance in this area and might be just consolidating before the next move up - but need to watch carefully because as of yet, there is still no confirmation of the 80 week low yet and when dealing with very large lows like this one, flitting back up and down is quite common.

Anyhow, I took some profits off above 4845-4850 NF, hedged the rest with 4800 puts. Now will just wait and watch. Will update if I do anything.

FLD cross 1 target was satisfied yesterday. 2nd is still pending - i.e above 4860-4870 area, we trigger target of 5050-5080. But this might take a few more days to trigger.

EDIT: 1.5hrs after open: Now that I got some more time for review, this is what I have. Yesterday first FLD cross - 5day FLD - generated 4850 as target and we hit it to perfection. Next the 10 day FLD - generated a higher target of around 4910-4920. This target is still outstanding. Then the 20 day or 1.25week FLD - this will generate a target of approx 5050-5080 once 4865-4875 is crossed. So basically the 10day FLD and 20day FLD are tied together and they together generate a target of 5050-5080 maybe bit higher to 5100. This is the outstanding target for now and what I am playing for. As I mentioned before, this will not happen in 1 day so play defensively but on the long side. Thats it for today. Questions are welcome.

Best,
Lee

FLDs and the Week Ahead

Back from a few days off from Thanksgiving Holidays over here. It was a good relaxing time away from everything.

Last week, we were trying to find some sort of bottom. I mentioned before that I have some signals that I am going to use for going long. I am still flat since none of my signals triggered yet. I will outline here now what is this signal so that you have some idea.

Till now, I have barely scraped the surface on the utility of the Hurst model or did not reveal too much to avoid confusion. I have been thinking that I will do that for past few days and mentioned it in my last update as well. Its called FLD - Future Line of Demarcation and is a Hurst concept. Basically it is price line of daily average price moved forward in time by a certain value - this value is determined by the cycle values - like 20 week, 10week, 5week etc. 5 week which is also the 40 day low for example, would be moved forward by approx 20 days. And will be called the 5 week FLD.

FLDs have a lot of utility - Crossing of an FLD confirms that that particular low has been set. And also gives us a target for the price move. See chart below -



I have added some annotations here - The 10 week FLD is offset by approx 34 days here because the 10 week is running 68.3 days right now. This is the light blue line I have shown on the chart. I just gave this as an example but you can see how it worked. Once crossed on downside, it confirmed the 10 week high and also projected a move 1000 sensex pts lower which we got as well. Its uncanny how often this works very well.

You can see several other examples in the chart. Just look at the light blue line - the 10 week FLD and see how it generated a target for the Oct 4th move up. Many more are there. See if you can spot them. When you combine multiple FLDs, it gives a lot of information on what to expect next in the market.

Each FLD cross generates a price target, this price target can generate another price target and so on. This is my trade setup right now. See chart below.



So first for me, the 5 day FLD or the white line should be crossed to the upside. This will generate a target equal to the move until it crosses the white line. Then the pink line and so on. The bigger the FLD line, bigger targets can be generated. And when there are multiple FLDs like this in this position, the move upward can be explosive. Maybe just like the downmove. I will add more on FLDs in coming days.

For now a move above Friday's highs on Nifty at approx 4770 gives very high probability that the lows might be in. And also projects a likely move above 4850(based on FLDs) and above 4850, I become quite confident that the 80 week low also might be in. I will go long today in small quantities with above prices to guide me on where to add and where to cut - Also will have a strict stop at the recent lows of 4650 area - Breaking below this level means the market has more work downside and also that the 80 week low is NOT in. How prices are acting with the FLDs will show me when to take profits or when to stop out the position.

Hope I made sense. This has not been an easy market to trade with all news noise out there. So hope everyone is still 'intact'. Trade Safe.

EDIT: Few minutes after open - 5 day FLD cross at 15800 SENSEX (4740 NIFTY) - Projects 16100 SENSEX (4840 NIFTY) : All approx figures. Lets see if this works out. 4840-4850 cross will give a target of 5050. One step at a time and I will fine tune these values tomorrow.

Best,
Lee

Action into the 80 week low

I strongly believe what we are witnessing right now is action into the 80 week low. The problem is that this is a longer cycle low hence for it to expand by a couple of weeks or 3 weeks even can be considered normal.

Expect more ups and downs - We should hold 4500-4450 area for this low. I would like it if we can hold the 4600 area but if that breaks, then we should see 4500-4450 area which I think will hold. Oh and I should also mention that 4700 first needs to break before entertaining any bigger bearish targets. Go from point to point and dont get greedy since we are so late in this cycle. Maybe we touch 4720, go up to 4900 and then do the final down to 4600 or slightly below - dont know just speculation for now. But it might happen quite quickly.

I know that there is a lot more possibility of big downs from here - but that is what we should expect in this cycle. But being short is also not easy due to the large swings going on. I am trying to trade here but its going back and forth too quickly - hence not easy. So I am trying to mostly scalp nowadays while we wait for the 80 week low. There are some ways of confirming that the 80 week low is in - I will explain this another day but I am keeping an eye on it.

BTW, I have replied to comments in earlier post.

Best,
Lee

A Review and the Week Ahead - 11/21

I thought I would start today's post with a review of the past few months, what my thoughts were, what actually happened and then what I think is going on now and what might happen in the future. I think this will be good for me also as I will be kind of thinking out aloud here.

Last couple of months or so have not been easy to navigate..But still there were lot of nice intraday opportunities and nice scalp trades out there.

Going back a bit, I think before Oct, I was expecting the 80 week low to come in sometime in November. But what actually happened was for Oct4th to show some kind of major low and put in a spectacular move out of it. The amplitude of the move out of this low was not expected for a 5 week low because a 5 week low was what I was expecting in Oct first week. The enormous rally out of that low had Sentient also confused and it started to label that low as the 80 week low which means it came very early for such a major low. You may remember the flip flopping and confusion at that time. I was very skeptical but eventually 'turned' and started to count Oct4th as indeed a major low. Once we took out 5200, I became confident that we were going to have a good rally for next few months. But market stalled at 5400 and broke down badly from there. Once we took out 5200 to the downside, I sold all cash positions and started to lean in bearish. And now..surprise surprise..Sentient also has changed its count and is thinking now that the 80week low is dead ahead of us. Infact we are very much in the time range for that low. Below is a screenshot of ST's latest view.



As you can see ST is expecting a major low right ahead. Is it already in last week? Could be..but we do not have any confirmation yet. And looking at how the momentum was last week, I think we might have some more work on the downside but it should be over very soon..Maybe next few days will do it. But price can quickly breakdown in matter of few days. Last week showed us that.

So bottom line..
We saw the last 80 week low around May 25th
The last 40 week low around Feb 11th
The last 20 week low on June 20th
The last 10 week low most likely on August 26th
The last 5 week low most likely on October 4th

So now projecting forward, we are around 40weeks from the last 40 week low and around 17.8 months from the last 80 week low. So we are well within the window of the 18month(80 week) low.

So maybe we can go up retest the 5000-5050 area again before revisiting the lows..maybe 4750 again to set low? Or maybe a bit lower to 4650-4600 area? One thing however need to be very careful here because we are in the window of the 80 week low. And rallies out of these major lows can be pretty spectacular and also very unkind to shorts.

Looking at the higher cycles. If you remember my older posts, I was thinking that along with the 80 week nest of lows, we would get the 4.5yr and 9yr lows as well. But after seeing price action over past 2 months or so, I am rethinking on this. I dont think this is a valid scenario anymore. i.e the higher timeframe longer term lows are not yet in...But we still can see a rally for couple of months in another 18 month bear cycle before it tops and goes for the next leg down. Yes too much to think right now but just wanted to put this out there because its a deviation from my original views. So what I meant to say is even though the 80week low can be bought for a positional trade, we will most likely see lower lows sometime next year. But then let us trade cycle to cycle..The smaller timeframe cycles.

I expect the bounceback to continue and then maybe we can go for one more shot down to set the 80 week low. All this can happen very quickly since we are in the 80 week low window. I will post updates if I see something different from this scenario in this immediate timeframe.

Best,
Lee

Bounce is on...For Now..

Well what can I say..been a tough few weeks in the market. This is the reason why I havent been posting much. I dont want to say something stupid and cause anyone else to make a mistake. I had suggested best thing to do maybe stay out until more clarity emerges. I am also really confused what is going on bigger picture wise.

Let me just try to think aloud here - We do know that some sort of major low was seen on Oct 4th at 4740 around. Lets assume this is the 80 week low for now. It was quite early but let us go with that for now. If we go with that assumption, then the 10 week low is due around Nov end/Dec beginning week. From there again, we can expect a decent rally. We should continue to decline into that low area. BUT for now however, yesterday, I think we saw some sort of very short term low below 5000 and we are doing the bounce up. For longs the obvious stop is yesterday's low.

Last 2 days, I got rid of most of my cash positions - the drawdown was not looking good on paper. But still its a small loss only because of the hedges. Overall I havent done so good last few weeks - so I decided to get rid of cash and go back to trading in Nifty. Since outlook is uncertain, I will be able to get in and out of positions. Also I am beginning to rethink on my longer term ideas. But I will keep that to myself for now and present them here when I have some more confirmation.

So long for now in NF..hope to get out around 5100-5150 area. From where again will try to build some short positions up into 5250 area.

Charts posted below.







Trade safe.

Best,
Lee

Pullback continues

So we got a higher open and then pulled back a lot..Today looks like 5100 test might be on the cards. I think its very important for the market to hold 5050-5080 area - worst case should hold 5000 area. Its been very confusing for few days now..I havent been trading much. Using puts to hedge, cashing it when its making some money - this is what I have been doing. Overall like I said yesterday, it does look bearish and expect it to remain this way until last week of Nov when the 10 week low will come in. The problem though is that I see this as the first 10 week cycle after our Oct 4th 80 week low - so we can expect lows to come in early.

After we get the 10 week low, I still expect a good year end rally from there. Problem is how much we will decline until then. We will wait and see. Ideally we should hold 5050-5080 worst case 5000. Lets see what happens. I might not update for few days atleast until I see some more clarity emerge OR I have something substantial to contribute.

Best,
Lee

Week Ahead

Dont have much time for a detailed update. Whatever I said earlier still stands. But I am seeing a few more bearish signs out there. So maybe we remain rangebound until Nov end or Dec first week which is when we can expect the 10 week low?

Today we should attempt higher and then maybe fallback to consolidate. Last week's lows are important. Breaking will lead to a test of 5080-5050 area. This should hold for the bullish case I think. Overall dicey here. Still holding to cash longs but will hedge them today. I have been buying the big scary declines as I have been saying for a while.

More later.

Best,
Lee

Friday

So big global turbulence going on while our markets are closed. Dont know why this always seems to happen when we are closed :) I have wondered about this before also on the blog..Its weird. Anyhow, it is what it is.

I still stand with my earlier views. I.E the 80 week low did come on Oct 4th at 4700 and we are unlikely to break that for next 4-5 months(till the 40 week cycle top). Next the 5 week low - I did mention it came likely came in last week. But not very sure now - it could be right ahead of us maybe today. Then the 10 week low likely around end of November. Maybe we will just chop around a bit more.

Looks like today market will gap down below 5200 so 5150 becomes important and below that 5100. But unlikely to get so far - Atleast I think so. But we are at potential supports here and so we might get a good size bounce here and then we can re-evaluate. There is pretty good put support at 5100 and 5000 so I do not expect these to break this month. I can be wrong but just seems extremely unlikely unless something really really bad happens on a global scale.

I mentioned in last time update I will be using these scary declines to buy back into stocks..All with the expectation that the 80 week low is behind us and the next 10 week low end of November will provide a base for a good end of year rally into Jan/Feb timeframe. Will phase out my buying until Nov end. Need to wait and watch.

Hope I answered all your queries here Aly.

Have a good trading day All.

Best,
Lee

80 week low confirmed

Yeah I know quite late. But better late than never right?..Anyhow I have the 80 week low confirmed on Oct 4th at 4740 odd. And the next 5 week low came up much higher at approx 5200. This 5 week low came up approximately where we expected our 80 week low. So overall since this low came up very early, its bullish in cyclic terms.

Latest ST outlook -



As you can see in the chart, the 80 week nest of lows is confirmed. And so we are cleared for atleast a few months worth of rise. If I have to guess, I would say cleared for upside until Feb end. This is when we can expect the next 40 week cycle to top. But lets take one step at a time.

What am I doing? - After selling most of my longs at approx 5300-5350 range, I accumulated a good portion back as per my earlier post in the 5200-5280 range. So still net long but have more ammunition to add longs if we do get some one or two day scary declines. It will be a good opportunity if we get that.

Next we have the 10 week low around end of Nov. So this can be another good opportunity to add to longs. So buy the dips will be my mantra going forward.

Target wise - I have a very rough target of 5700 based on Hurst methodology. But I havent fine tuned this yet. Sustaining above 5700 can open up 5900 and even a challenge of our all time highs.I will do a detailed post on this tomorrow. This is based on FLD(future line of demarcation) crosses which generates targets per Hurst Methodology..I havent spoken about this yet but will do so tomorrow.

Best,
Lee

Thrown off the bus?

Looks like a big gap up today. Again I am in a quandary here. Did we get the last 5 week low at 5200? A little early but still in the window. So did the market just throw us weak hands off the bus, consolidate ABOVE 5200 and is getting ready to take off? Funny how that works. And I did mention that possibility a little while back. Nuts!

See the ST screenshot below.



Sentient Trader Software

See those question marks? Its actually ST's way of saying possible low might have been seen and as some more days and price conditions are met, it confirms the low.

I do not know exactly what to do right now. I covered some shorts yesterday when we tested 5200 area. The rest is hedged with 5300 calls. So today likely will just take the pain and wait for more clarity. I might also start buying back into the cash positions I sold few days back. Yeah I know dumb move on my part but this is how cycle lows work..throw most people out of the bus and then reverse.

The other big thing here is the downslopping trendline which comes at approximately 5450-5500 area. Unless market clears that area, we cannot confirm anything at all.
I might not post for few days until more clarity emerges.

One more thing..I mentioned I would address the longer term buy question. I am not very sure but I think if this 80 week low is in which it most likely is, then we should be cleared for upward prices atleast until next Feb-March timeframe. This will be when the next 40 week cycle tops approximately. We will fine tune as we go along. But markets might be bullish into that timeframe..maybe even very bullish once we clear 5500. Then again I am expecting a bear move into the 40 week lows toward end of June timeframe. All very fluid right now and we need to see as we go along. Cannot assume anything right here. I remember someone mentioning Vivek Patil's views which seems to gel with what I am saying above. So I also concur with it..Can anyone post a direct link to his latest views?

As always, comments are welcome. Have a good long weekend all!

EDIT: I just wanted to add one more thing. The most likely scenario here is that we test 5400-5450 range here and then go down again to test the 5200 support again before taking off to the upside. Else we could just take out 5450 and take off. Wait and watch.

Best,
Lee

Que Sera Sera

So..looks interesting right here what the cycles are doing...If I were not trading or directly involved in the market, I think I might have taken this as a serious academic exercise. Thats how interesting these cycles are playing out right now.

In college, I used to hear, cycles, fourier transforms, spectral analysis etc..But now I see the practical analysis of it. Funny right? Now we see the practical aspect of it!

Ok so now coming to the market, I sold cash positions yesterday. I dont know maybe market will brand me as a fool very soon because I did this. I know most of you will lol..but I have to go with what the market told me to do..So sold cash positions, established shorts at the 5300 area with hedges at 5300 calls. So I will just watch today most likely. We are declining now into the the 80 week low but the problem here is that the US 80 week low is projected toward Nov end while our 80 week low should come in sometime next week. This is the reason why we are more bullish that the US or other western markets.

This is the reason why I mentioned better to sit out and then buy in size when we have more confirmation on the low. I know in earlier post comments, there were questions on longer term buys etc..And what will happen next year..I have some ideas on this..so I will do a post on this a little later. It looks like we are NOT THERE YET.

Best,
Lee

Tough Call

Once again I feel we are at some sort of crossroads here in the market. Today we have to hold 5200-5160 area. Else the trapdoor to lower lows might open up again. My idea of shorting in the 5350-5400 area was correct but I also covered too early I guess when I did yesterday. There are some quite bearish possibilities opening up here atleast for the next 1 month. I think we need to be very careful here over the next 2-3 weeks. Remember I was looking for the next low in the next week but it can extend a bit being a major low. So its time to be careful I think.

So I am wondering what to do today. I do have some long cash positions as I have been mentioning for a while. But today I am again wondering whether it makes sense to close most of them and again rebuy again in a couple of weeks. Its a tough call. I would say if you dont have any positions, better to just sit out the next 2-3 weeks and then buy in size. Break of 5160 opens up 5050. And break of that opens up 4800 and maybe even new lows. But we might bounce about a little today and tomorrow before the market makes a decision on what to do next. Lets go point to point without any preset notions. On upside market needs to break above 5450-5500 to go higher. Maybe much higher.

I am sorry I am not able to make much of a directional call here but market has once again thrown us a curve ball and so need to do our best to navigate it.

Bottom line is I will be taking a very defensive position here for the next few days until more clarity emerges. And we should get this over the next few days.

Comments are welcome. Remember always - I am also just like you guys trying to navigate the market.

Best,
Lee

Bottom Line

Likely the 80 week low has already been seen price wise. This was on Oct 4th. So the next 5 week low is expected to come in around this week Friday or next week Monday/Tuesday. So shorts should not be taken beyond that and buys are going to be more profitable...Buying the dips that is. Shorts taken yesterday can be covered today and retaken at higher levels or managed with some sort of trailing stoploss. But I still think the big money is to be made on the long side buying the dips into the next 5 week low.

Charts posted yesterday are still valid.

Best,
Lee

Week Ahead - 31/10/2011

Updates for the week ahead. I have included most of my comments in the charts itself but increased the font size so should not be a problem to read now - right click and open in a new window to see the charts. Let me know still if anyone has a problem reading and I will move all my comments to the text section only.

Bottom line is the nominal lows of this 80 week cycle might have already be seen and we are in an uptrend. However we are close to resistance at 5450-5500 so expect a pullback and consolidation for next few days/week. Infact if you remember, this was one of my preferred scenarios - break out above 5200 and then retest it from above. But several possibilities are there.

See the charts and study them. I have tried to analyse various timeframes and possibilities here. I have included a GOLD chart also. Also the final picture is the portfolio update. I think I will move this to be a bi-monthly update from now on - being a cash portfolio will take time to grow. Posting weekly does not make much sense.

Nifty Normal View - Daily



Nifty Weekly View - Weekly



Nifty Hurst View



Nifty Hurst View - Expert Model



Gold Hurst View



Cash Portfolio Update



Link to Sentient Trader Software

Comments are welcome.

EDITS: 10:07AM - In case you guys are wondering whats going on, there is a major currency intervention going on in the Japanese markets. This is what is causing the turbulence in the markets..Yeah its a reason..but we are going for the cycle lows soon looks like..A higher low as I have been saying..So I have been slowly building into shorts here in futures. Cash positions remain as is. The last time they intervened in Forex was Aug 4th. You all know what happened Aug 4th, 5th and after that also. Play cautiously

Best,
Lee

Update for 28th of October

Will Update a little bit late..probably 15-20 mins late.

EDIT: WILL UPDATE TOMORROW. NOT MUCH OF UPDATE TODAY. UPSIDE CONTINUES.

Thanks,
Lee

Wishing everybody a very Happy and Prosperous Diwali

First of all wish everybody a very Happy and Prosperous Diwali!

So looks like this confused bull is maybe slightly vindicated right now with the markets above 5200. So the next thing to see is can we get into the lower 5300 range and then consolidate above 5200 - this is what I will be watching out for. Let us see.

I got up today early morning for this special session. I have few NF longs from the 5050 area which I will be covering today. Its a pretty good profit to take today. Still holding the cash portfolio - To tell the truth its not performing as well as I would have liked but then need to give it more time in the larger scale cycles..We shall wait and see. I am churning it around..cutting down the losers and adding to winners..will be doing this for some more time. Market needs to gain more momentum and confidence. It might only happen after the next 5 week low(and higher scale possibly) expected in the 1st week of Nov. I will post a more detailed view with charts tomorrow.

Happy Trading!

Edit: 5pm: Covered NF after some time after the open and now bought back some. Frankly speaking, not seeing much bearishness. Maybe because its today :) still the Nov 1st week cycle low is looming in there..need to be watchful.I would really love to see some consolidation around here building a base and then moving higher. Anyhow, we will see in coming days how it all works out.

5:10pm - Out again..Thats it for today.

5:20pm - One more add..Buying few 5200 puts now. Not sure if this is a wise move with a lot of big news coming tomorrow but this is in part to protect my cash positions and also because of the upcoming cycle low in Nov 1st week. We shall see.


Best,
Lee

5160-5200

This obviously remains the BIG barrier right now for market upsides. This needs to be cleared before we can say all clear for higher prices. I earlier thought market might clear it an then retest it from above. But does not look like it at this point. So we might consolidate and move lower here for a few days to set the 5 week low before we can rally higher.

Of course today is a big news day so anything can happen. And together with that expiry. So could be quite a day. I still have some future longs from 5050 area. I think I will close them today to be on safer side and wait and watch. Cash side I have already spoken about before. I will be doing some rebalancing today - removing some underperformers and freeing up some funds for later.

Charts are still relevant from yesterday. And I will post some more thoughts later on the market cycles. Dont miss the comments section from last post.

Best,
Lee

Week Ahead - 24/10/2011

PS: I changed my profile picture to a 'confused bull' LOL :D



Maybe now the market can go down in earnest!

EDIT: 10:05AM: Looks like my comments have been taken in wrong sense. It was part in joke. See my confused bull comments and picture were just to put forward a humorous view on my mentality right now. I am bullish dont get me wrong. But I am still cautious till Nov 1st week end. After that I think we wont see a lower low so buying is the way to go. So Today I had lot of NF longs from Friday.I covered some today...and still holding the rest FWIW for higher prices..But if I think it wont go higher from here, I will be quick to cover..will post updates.

Best,
Lee