February 13, 2017

2/19/2017 ICICIdirect.
com::Market::TechnicalAnalysis
WeeklyTechnicalAnalysis
February13,2017
ByVivekPatil,India'sforemostexpertinElliotWaveAnalysis
TopStoriesoftheWeek
Sensexstrugglestosustainathigherlevels,butmanagestoend+ve.
RBIsurprisesbykeepingratesunchanged.
SCdirectsattachmentofSaharaAambyValley.
Infosysfoundersraiseastinkovercorporategovernance.
IIPshrinksin'Decasdemonetisationhitsdemand.
WeeklyDojisuggests"struggle"atupperparallel,watchfordecisivemovesbeyondDoji

[Technicalreadingscarriedforwardfrompreviousweeksareshowninitalics.Readers can easily identify the new arguments which
arewritteninregularfont]
Last week we discussed, c leg of the abc structure from Dec16 continued beyond the Budget. The 2day pause could be
consideredlowerdegreebleginsidethesubdividedcleg.Thechartshows0blineforc leg The Grey color 0b line would
now be crucial. As per NEoWave, faster break below this 0b line would be the initial sign that c leg may be over
SustainabilityathigherlevelsshouldbeunderlinedforthefreshweekbecauseIndexistradingclosertotheupperYellow
paralleltothe(larger)0bline.Also,theDailyOscillator,at92,isonceagaintouchingoverboughtzone
Sensexdidfaceproblemofsustainabilityathigherlevelsaswesuspected.TheactionopenedwithagapuponMonday,butthe
days high proved high of the week. Turning lackluster thereafter, it covered Mondays gapup area during the week. Also, after
MondaysBullcandle,itcouldformonlyBearcandlesfortherestofthedays.IthitthelowestpointafterRBIdeclaredstatus
quoratepolicyonWednesday,butholdingthelow,itfinallysettledamarginal93ptsor0.3%higher,formingaLong Legged Doji
candleonitsWeeklychart.
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2/19/2017 ICICIdirect.com::Market::TechnicalAnalysis
Long Legged Doji on the weekly chart was formed because Sensex closed at a similar level where it had opened on Monday.
ThecandlehasvirtuallynoBody,butitcarriesShadowsonbothsidescomprisingvolatilityintraweek.
Suchanactionprovidedachallengingandchoppytradingenvironmentfortraders.Theaction turned selective in the broader

market.WhiletheIT/Realty/CapitalGoodssectorsmoved+ve,manystocksattractedprofitbookingathigherlevels.
WedidnotruleoutsuchchoppytradingathigherlevelsbecausetheDailyOscillatorwasoverbought,andtheIndexwas
tradingclosertotheupperparalleltotheYellow0blinefortheabcrally.
Indeed, we were watching if the c leg matures near the upper Yellow parallel. The initial sign of that, we argued, required
breakingtheGrey0blineofthecleg.Indexbrokethelinemarginally,butitonlyaninitial,1ststage,sign.
The 2nd and the final stage for maturity of upward c and opening downward d would require faster retracement of
internalrallyingsegmentofthecleg.Thisisyettohappen,andwedcontinuetowatchforthesame.
TheLongLeggedDojiontheWeeklychartcanproveasshorttermturningpoint,forcompletingcandopeningd,ifwe
seeadecisiveweaknessbelowitsbottom.
Inthatcase,however,weareonlylookingforadownwarddleginsidethelargerrally,whichcantestorbreakmarginally,
theYellow0bline.
Overall,remember,weconsideredpostDec16rallyasanewupmove,andtargetednewalltimehighsfortheIndex.Faster
move above Sep16 high of 29077 (Nifty 8969) by Mar17 will provide the structural confirmation that postDec16 rally is indeed a
newupmove.
LastweeksrangeappearedasaStruggleZonebetweentheBullsandBears.Inthefreshweek,adecisive move beyond

lastweeksstrugglezonecouldtellusifupwardccontinuesORdownwarddopens.
SinceDec16,Sensexcloseonlychartstillshowshighertophigherbottom,whichdefinesanUPtrendasperDowTheory.
Tillthetrendcontinuesup,alldipswouldonlyprovidebuyingopportunities.
Even last week, the low made by the dip after RBI Policy on Wednesday was not broken later. As long as the dips on Sensex
attract buying, the c leg may continue to develop. Watch for its maturity when it starts to retrace its internal rallying
segments.
________________________________________________________________________________
Remember,rallyfromDec16hadalreadycrossedthe61.8%retracementleveltotheprecedingfallfromSep16toDec16.The
rally, therefore, was considered as a new upmove, the final confirmation of which requires faster retracement of the
precedingfallfromSep16toDec16.
By NEoWave, faster retracement of the last segment of a structure confirms that the structure is complete, and another
structureinanoppositedirection,i.e.upwards,hasopened.
Aswementioned,theNEoWavepatternimplicationforthemoveoutofaNeutralTrianglewould75%ofitslargestleg. Since
Dwasitslargestleg,wecalculated30500(Nifty9500),oranewhigh,astheupsidepossibility.
Earlieron30thSep16,weprojectedElegtogodownandendnear25000500(Nifty77007800)levelsduringDec16. News
aboutTrumpvictoryandDemonetizationcamelater,duringNov16,anditonlyhelpedEtomoveclosertoourdownsidetarget.
TheElegendedat25718(Nifty7894)exactlyinDec16.Whilethetimetargetcamethroughperfectly,pricewiseweconsidered
ittobeinside13%tolerancelevelallowedunderNEoWave.We,accordingly,turned+vefromDec16onwards.
As can be seen on the following chart, Index showed a Double Bottom during NovDec16 and later achieved its upward
projectionbasedontheheightofthepattern.
Afterflatteningfor2months,aswehadarguedfor,the200dayEMAhasnowturned+ve,andindeedprovidedsupportforthe
blegdipduringJan17.Indexalsocrossedthe61.8%marktoprecedingfalltosuggesttherallycouldbeanewupmove.
Index has reversed after achieving downside technical targets, timewise (Dec16) as well as pricewise (25000500), almost
exactly.
Here we take the opportunity to highlight the importance of Technical Analysis, especially the NEoWave Analysis, in
forecasting the market action. Fundamentallyoriented players found it difficult to turn +ve after Trump victory and
Demonetization.
Index showed a Head & Shoulders formation at its Sep16 top, and our downside target also achieved the downside projected
onthebasisofitsheightoftheH&Sformation.
Index came down to 25718 (Nifty 7894) in NovDec16, which was inside 13% tolerance level allowed under NEoWave, We,
therefore,turned+veandopenedupsideswithcrucialupsideat61.8%retracementlevelatabout27800(Nifty8560).
As we mentioned, the 61.8% level was also close to (1) Neckline of the Head & shoulders formation (2) Double Bottom
height projection and (3) Turbulence area of 911 Nov16 on Trump victory & demonetization. We wondered if the rally
wouldbeanewupmoveORjustanxwave.Todecideonthis,weconsidered61.8%levelsascrucial.
In Sep16, we had expected Index to drop to about 25000500 (Nifty 77007800) as our downside target, based on 60% NEoWave
retracementoftheprecedingTripleCombinationrally.ThistargetwasalsobasedonthelargerNeutralTrianglefromMar15,as
shownonthefollowingchart,whereinElegwasexpectedtoachieveequalitywithAleg.
Against this target, Index achieved a low of 25718 (Nifty 7894), which we found to be within 13% tolerance allowed under
NEoWave. We, therefore, expected Index to recover, and it did oblige with faster retracement of the last falling segment (g
legofDiametric),asrequiredunderNEoWave.
ThebottomsmadeduringNovDec16weresimilar,i.e.25718&25754(7916&7894onNifty),andtherefore,theylooked like a
DoubleBottom,whichisareversalformationasperconventionalTechnicalAnalysis.
Thehighbetweenthese2bottoms,i.e.highof9thDecat26804(Nifty8275),wascrossedinJan16,whichisaconventionalmethod
toconfirmaDoubleBottom.TheheightofsuchaDoubleBottomcanbeprojectedaspossibleupside,andsamewouldalso
calculatetolevelssimilarto27800(Nifty8560),closetothe61.8%levelmarkedonthecharts.
The 61.8% level is also close to Neckline of Head & Shoulder formation we had marked as Sep16 top reversal formation.
Index,remember,brokethisNecklineinNov16,andachieveddownsideprojectedonthebasisofheightoftheH&Sformation.
The 61.8% level is also close to the high of 10th Nov16 at 27743 (Nifty 8598), where Index went into a huge Turmoil
immediately after the Trump Victory and Demonetization. Remember, Index lost 1685 pts overnight on these news flows,
recovered1835ptsby10thNov,onlytodroptoanewlowthereafter.
Ononehigherdegree,thepostSep16fallwasmarkedasElegoftheNeutralTrianglefromMar15.WesaidthatEleg of
Neutral Triangle usually achieves similarity with its A leg. Such equality projected the possibility that E could end in
Dec16at25000500levels.
Remember, A leg of the Neutral Triangle was from Mar15 to Jun15, which measured about 3700 Sensex points in 3
months.TheElegmeasuredabout3400ptsin3months(fromSep16toDec16), and thus satisfied the requirements of
similaritywithAleg.
Asweshowedonthechartbelow,allcorrectivephasesinIndianmarketconsumedabout13or21months,bothofwhichare
FibonacciNumbers.Dec16wasthe21st monthfromMar15.Thus,thelargercorrectivephasemayhaveendedasaNeutral
Trianglein21months.
Accordingly, we raised the question if the Corrective phase is now over, and whether a new upmove has indeed opened
fromDec16bottom. If it is a new upmove, then Index should move to new alltime highs above Mar16 high of 30025 (Nifty
9119).
However,wealsomentionedthepossibilitythatthepostDec16movemaybeonlyanxwaveaftercompleting1st Corrective
asDiamondShapedDiametric.Ifitisonlyanxwave,thenitshouldendbelow61.8%retracementleveltothe1st Corrective.
The61.8%retracementlevelcalculatestoabout27800(Nifty8560),andthesameisaccordinglymarkedontheinitialDailychart
as a crucial upside for the current upmove. By NEoWave, a small xwave should not retrace more than 61.8% of the 1st
Corrective.
WehadshowntheYearlytrajectoryforSensexonthefollowingchart,andsaidthelowertrajectorylinewhichjoinsthelowof2012
and2013,wasvaluedat29000fortheYear2017.
Wealsosaidthatthelowertrajectorylinewouldbedefinitelybrokenaswebegintradingforthenewyear2017.
We,however,wonderedifthisbreakwouldleadtodisastrousconsequenceslikeitdidafterbreakinglowertrajectorylinein
1995and2008.Atthispoint,weareonlyraisingthetechnicalconcernsandnotdrawinganyconclusions.
A Neutral Triangle is a 5legged pattern with an Extended C leg. Its A and E leg usually tend towards pricetime
equality.SinceA measured about 3750 pts in 3 months, we projected E to end near 25000500 by Dec16, to achieve time
priceequalitywithA.
ThedofNTendedon22ndSep16asaTripleCombination, for which, the NEoWave pattern implication is about 60 to 70%.

The60%implicationalsocalculatedas25000500(Nifty77007800)asadownsidetargetforeofET.
NEoWavebelievesall chart actions are explained as pattern implication of preceding pattern. This, accordingly, called for re
arrangementofourpreviousstructuralassumptions,inordertoexplainorjustifylastWednesdayshugefall.
The endpoint of larger D leg rally from Feb16 onwards has been shifted backwards to 22nd Sep16 high of 28872 (Nifty
8893).Asaresult,theendpointof3rdCorrectiveinsideDalsostandsshiftedtothesamepoint.
Atthispoint,the3rd of D stands completed either as 5legged Extracting Triangle (as shown on the Daily chart) OR as 7
leggedDiamondShapedDiametric.
TheblegofourETformedasanIrregularBCFailureFlat.AsperNEoWave, IrregularB CFailure Flat has larger pattern

implication compared to a normal Flat. The irregular nature, or larger size of its lowerdegree b, and the failure of c to move
abovea,togetherindicatesalargerdownwardpressurecomparedtoaNormalFlat.
Indeed,asperNEoWave,patternimplicationofIrregularBCFailureflatisminimum161.8%magnitudeofb,tobeprojected
fromtheendpointofc.Further,thispatternimplicationistobeachievedwithinthetimeconsumedbysuchaFlat.
Ascanbeseenonthechartbelow,lowerdegreebmeasured990ptsfrom28478to27488.A161.8%ratioofthiswouldbe1602
pts.Reducing1602fromendpointofcat28257wouldproject26655.Thisprojectionwasachievedwithintherequiredtime,
asshown.
TheclegofETwasaZigzag,anditslowerdegreebwasalsoanIrregularBCFailureFlat.Asshownonthefollowingchart,
itspatternimplicationwasachievedbythefall:
The c leg measured 2355 pts (Nifty 735 pts) in 12 days. Against this, d measured 1841 pts (Nifty 596 pts) in 12 days. As per
RuleofSimilarity&Balance,2wavesofthesamedegreeshouldbe1/3rdinPriceorTime.
Accordingly,thoughdwassubstantiallysmallerintimecomparedtoc,pricewiseitsatisfiedtheaboveNEoWaveRule.Therefore,
fallfromlastThursdayshighof27743(Nifty8598)mayeitherbelowerdegreebleginsidedORelegoftheET/NT.
Ifitiscorrectivephaseinsided,orEofNT,thenthecurrentfallcouldprotectlastweekslowof25902(Nifty 8002).
NTcouldevenseeEachievingequalitywithA,atabout26600(Nifty8230).
However,ifthefalliselegofET,theneshouldbelargerthanc,asexpectedinsideanExpandingTriangle.
Theelegwouldturnlargerthancbelow25400(Nifty7860),whichisalevelexactlyinsideourmonthlongdownside
targetof25000500wemarkedon30thSep16.
Ononehigherdegree,ETformingfromSep16isElegofthelargerNeutralTrianglefromMar15.
WehadarguedthatmajortopusuallyconsistsofbroadermarketlosingmorethanthemainlineIndexes.Ascanbeseenon
thefollowingchart,bothSmallCapandMidCapIndexeshavelostmorethantheSensex,especiallyafter4thNov16.
Remember,evenbeforeweopenedthedownsidestructuralimplications,wesawIndextoppingouton8thSep16 exactly at
upperoftheBluechannelshownontheDailychart.AsperNEoWave,allComplexCorrectivedevelopmentsgetcontained
inachannel.
Thereafter,Indexbrokethe0xline,weshowedinYellowcolor,on26thSep.The heavy drop on 29th Sep, when we ended

DasperBlacklabels,brokethelowerendoftheBluechannel.
After 6 consecutive Bull candles on its Monthly chart till Aug, Index formed a Bear candle for Sep. Remember, 6
consecutiveBullcandleisarecordsincetheyear2008,andtherefore,itindicatedanoverstretchedsituation,especially
becausetheNiftyPERatiohadreachedBubbleTerritory.Majortopformation,usually,comprisesoflargerdamageinthe
broadermarket.
AsperDowTheory,thelowertop lower bottom formation defines a downtrend, and the downtrend will be assumed intact until
Indexcanreverseitbyforminghighertophigherbottom.
WealsosuspectedmaturityastheDlegasitwasaTripleCombinationCorrectiveandIndexwasalreadyformingits3rd
Corrective,whichisalwaysthelastCorrectiveofanyComplexdevelopmentinvolvingxwaves.
We had also argued that a Triple Combination carries pattern implication of 6070% retracement. We also marked the 60%
implicationat25000500ontheinitialDailychart.OnNifty,60%retracementlevelwouldcalculateas77007800.
We,remember,assumedthatIndexwasformingaNeutralTrianglesinceMar15onwards,asshownonthefollowingchart. If
itsDlegisover,asdescribedabove,itslastlegEwouldgodown.
IncaseofNeutralTriangle,EcantendtowardsequalitywithAlegfromMar15toJun15.Ifso,thensuchequality would
alsocalculatelevelsprojecting25000500(Nifty77007800).
Equality of E to A could be timewise as well. Since A consumed 3 months from Mar15 to Jun15, E could complete by
Dec16,i.e.in3months.
WealsowarnedofmaturitybecausetheNiftyPERatiowasintoaBubbleTerritoryabove23.50,aswasshownonthechartbelow:
The NEoWave pattern implication for Triple is 6070% retracement. So, if 8monh long D leg from Feb16 (22495/6826) to
Sep16 (29077/8969) is completed, then Index can drop to at least 25000500 (Nifty 77007800) levels, which is around 60%
retracementleveltoDleg.
Remember,lastyearwehadusedthispatternimplicationtopredictSensexcouldcomedownto22500,andthisyear,Indexhitthe
levelexactly.
Zigzagisthemostsevereapattern.FlatisconsideredapatternwithlesserseveritycomparedtoZigzag.However,Triangleisthe
leastsevereofallCorrectivepatterns.
Thatiswhy,underNEoWave,aComplexCorrective development, involving xwaves, usually ends with a Triangle in the last
Correctiveposition.
Inside the larger development from Feb16, which we considered as D leg, we marked a DiamondShaped Diametric in the 1st
Corrective, and a Flat in the xwave. The xwave finished at the Brexit low on 24th Jun, and we had opened an upward 2nd
Correctivethereafter.
We saw that high crossed the top of B (Jul15 high of 28578) marginally. Remember, Nifty had already crossed B much
earlieron27thJul15.NowSensexhasalsofollowed.
Due to this, the ABCD development from Mar15 last year is now assumed as a Neutral Triangle, instead of Running
ExpandingTriangleweassumedearlier.
Remember,structurallywehadalreadysuspectedthatthedevelopmentfromlastyearshighof30025(Nifty9119)couldbe
anExpandingorNeutralTriangle.
We,then,openedtheDlegofthispatternfromFeb16,i.e.fromourlastyearstargetlevelof22500(30000less25%).
Asweexplained,iftheSensexactuallymovesabovethetopofB,thenthelargerstructurefromMar15couldconvertfrom
RunningExpandingTriangletoIrregularExpandingTriangleorNeutralTriangle.
We, remember, have already marked 5legged Triangle since Mar15, and observed that C was 161.8% of A. The current
developmentfromFeb16onwardswasmarkedasDleg,whichisalmost261.8%ofBleg.
The Irregular variation of Expanding Triangle could carry implications similar to Running variation for its E leg. In
bothvariations,thedownwardecouldachieve161.8%to261.8%ratiowiththeAleg.
However,inboththevariationEFailurecannotberuledout.NeutralTriangle,however,isamissingvariationofTriangleunder
OrthodoxWaveTheory.
Imagine, if Contracting Triangle is like 1st Extension Impulse, and Expanding Triangle is like 5th Extension Impulse, then
NeutralTrianglewouldbelikenedto3rdExtensionImpulse.
NeutralTriangle,adiscoveryunderNEoWave,isa5leggedpattern,justlikeanyotherTriangle,butitsclegisbiggest(like
3rdExtension),andalegandelegtendtowardsequality.
Goingbythislogic,incaseofNeutralTriangle,wecouldseeE(lastleg)tobesimilartoAleg.Remember,Alegwas
3700ptdownmovefromMar15toJun15.OnNifty,itwasabout1175pts.bymagnitude.
So,iftheDlegendsaboveB,thenwecouldonlyseealimiteddownsidesimilartoAleg,asmeasuredabove.
In any case, as we observed, the Nifty PE Ratio is into the Bubble territory above 23.50. As we argued, although it may spend
sometimeinthisterritory,itwouldbewisetoremainextremelyselectiveforthetimebeing.
Market,atSensexandNiftylevel,isup27%fromitsbottomatourlastyearsprojecteddownsideof22500(6825).
Major upside of about 300% on an average was seen in Sugar stocks. Since these are not normally part of Mutual Fund
portfolio,MFholdersmayhaveseenlimitedorflatreturns.
Sensex closed Jul16 at 28052, against 28115 level it close 1 year ago in Jul15. Since MFs focus is usually on frontline
stocks,NAVscouldbeflat.Thisisjusttoemphasizethatmarkethasbeenselectiveandeventricky.
Havingrallied2527%,thevaluationsareveryclosetoBubbleTerritoryasshownbytheNifty50PERatiochartwefollow.This,
remember,isanofficialNSEdata.WemostlyfollowtheNSEdatainthisregardasBSEdata(shownelsewhereinthereport)was
foundtechnicallyundependable.
Inanycase,lasttimeweusedthischartwasduringJanMar15period,whenthePERatiohadreachedtheBubbleterritory
above23.50.Sensexshavedoff25%from30Klevelstoourtargetof22500.
This is not to say that market has peaked already, but it is not in the safe territory for investors. One should, therefore, chose
stocksandsectorsmorecarefully.
Alsoobservethe2yearcycleoftopsandbottomsontheMonthlychartofSensexshownbelow.Since1980s,thiscycleshows
IndexturningeveryalternateMarch.
As can be seen on the chart below, most of the recent bottoms were confirmed with a higher bottom formation, which,
however,retracedtheinitialrallyfromthebottombyabout6080%.
Justbeforeabigrally,remember,Indexusuallyabsorbsallthenegativityatsuchahigherbottom.
Overall, we mentioned that the levels of 2130022500 are crucial on downside because it was the NEoWave pattern
implication of 60%70% retracement to the 19month Triple Combination rally from Aug13 to Mar15, as was shown on the
followingchart.Indexdidrespectthepatternimplicationandrallied25%.
Thestrongbouncecameexactlyfromourlastyearstargetof22500.This level was imprinted on the mind of the players,

andtheyplayedit.
This level, remember, was 60% pattern implication for the 19month long Triple Combination rally from 17449 (Aug13) to 30025
(Mar15).The60%calculatedto22479,andSensexbouncedfrom22495.Weprinted22500.
However, Index could now be under the influence 8year cycle of losing 5060%, and has broken its yearly trajectory since
2012(refertorelevantchartshownelsewhereinthisreport).
Underthecircumstances, failure to base out, holding 2130022500 (Nifty 63506750), i.e. the 6070% pattern implication area,
couldresultinanOct08likesituation.Budgetneedstocreateadramatic+vesentimenttoavoidsuchaneventuality, else

Over a year ago, we showed performance of Sensex post elections on the chart given below. As shown on the chart, Sensex
performancealwaysremainedsubduedafternonCongressGovtgetselected.
Asweargued,anytimetheSensexdipsbelow25Kduring2016,itwouldbreakitsYearlyTrajectory.Break of the trajectory

could have implications for the coming year. Structurally, it would raise the possibility of the current corrective phase from
Mar15stretchingto13monthstillApr16.
Remember,SensexwasalsotestingthecrucialMonthlyBaselineweshowedonthefollowingchart,andthesamehasbeenbroken.
PostFeb16rallylookslikeapullbacktothebrokenline,fromwhereIndexiscurrentlyreactinglower.
Prior to 2013, there were two major corrective phases, first during Jan08 to Mar09 and second Nov10 to Dec11, and both
lastedfor13months,anotherFibonacciNumber.
Basedonthesehistoricalnumbersformajorcorrectivephasestimewise,itispossiblethatifthecurrentphasestretchesbeyond
Nov15,i.e.8months,thenitcanextendtoApr16,i.e.continuefor13months.
LasttimeFIIssoldoutwasduringOct07toMar09,whentheIndexshavedoffasmuchas63%.FIIsinvestedRs.612000crs
afterMar09,butDollex30showedunimpressivegainsduringthisperiod,asitisstillbelowits2008highs.
Latelastyear,weexpectedmarkettohitamajortopduringJanuaryofthisyear,basedonJanuaryToppingcycle.
Asweshowedonthefollowingchart,exceptduring2006,allthemajorandminortopsonSensexoccurredinthefirstquarter
ofeveryCalendarYear,for15yearssince2000.
Wealsopointedoutthatmarkethasseenmajorcorrectionsorprofitbookingmodesevery2yearseversince2004.
Except during 2013, when Sensex corrected only 13%, all other corrections saw cuts of either 2535% (like during 2004,
2006and2010)or5060%(likeduring2008).
Thelastmajorprofitbookingwasduring2013,andin2015,2yearcycleofprofitbookingwasdue.
Wehavebeencautioninginvestorssincethebeginningof2015alsobecauseIndexhadachievedbreakoutimplicationof5
yearAscendingTrianglefrom2008to2013,weshowedonthefollowingchart.
The largest leg of the Ascending Triangle was the fall of 200809, i.e. about 13000 Sensex points. As per NEoWave, the
normalthrustimplicationoutofaTriangleis100%ofthelargestlegoftheTriangle.
FromAug13,whentheAscendingTrianglegotover,Sensexhasmovedupalmostexactly13000ptsfrom17449to30025:
The Sensex top at 30K levels was exactly the Grid level as per VPs Grid Levels System (GLS), which we have been using
sincelast5years.
ItwasalsopointedoutthatIndexlookedoverstretchedafterrallyingfor12quarters,whichwasasituationsimilartomajor
topof2008.
The22500levelisalsoclosetopreviousmajortopsof2008&2010,andisalsothelowestlevelofSensexTrajectorywe
showedsincebeginningofthisyear.Itisalsovalueofthelinejoining2003&2009bottomsonYearlychartofSensex:
ThelikelySensextrajectoryfortheyear2015couldbeprovidedbythechannelshownontheYearlychartabove.
Aswesawpreviouslyduring1988to1994,andagainfrom2003to2007,Sensexbullphasetrajectoryisusuallycontainedin2
parallellinesroughly.Sensex,inthepast,maintaineditstrajectoryfor5yearsor7years,beforebreakingit.
Thecurrenttrajectorybeganfrom2012,and2015wouldbe4thyearinthistrajectory,whichcouldbreakeitherduring2017or
2019,ifthepastisanyindication.
Fortheyear2015,thetrajectoryprojects32800ontheupsideand22800onthedownside.
For2016,however,thelowerlineisat25500asmarked.
The current trajectory is at a lower angle (about 30 degrees), as compared to previous 2 trajectories of 198894 and 20032007.
The angle of ascent for both was identical at 60 degrees. The lower angle of current trajectory has been despite heavy FII
Inflowsandpoliticalchange.
Technicalreadingscarriedforwardfrompreviousweeks
ThedisparitybetweenSensexandbroadermarketwasshownonthecomparativechartbelow.
The broader market outperformed Sensex from Nov13 onwards, and its outperformance was especially significant from
16thMayonwards,thedayofElectionResults,ascanbeseenonthechart.
WeconsideredpostAug13developmenttobeFlegofalargerDiametricformationfrom2008onwardsasshownonthechart
below.
This longterm scenario marking the larger Diametric was published on 6th Feb12. This Diametric assumption, as was argued,
comparedwellwiththe11yearDiametricformationpreviouslyseenduring1992to2003.
As shown on the chart above, F is the Expanding leg of the 7legged Diametric from 2008. In the previous instance of the
Diametricduring19922003period,Fleghadhitnewhighsduring2000.
In other words, F leg of the diametric making new highs is nothing new. After hitting new highs during 2000, G leg went
downtill2003.
We argued for a Diametric development from 2008 onwards because we observed timesimilarity within its legs, which is
symptomaticofsuchapattern.Sofar,mostofthelegs,exceptBandD,haveconsumedexactlyabout13months.
OnthemonthlyCloseonlychartgivenbelow,onecanseeSensexcrossingprevioushighs,indeedtakingtheirsupportfor
reachingfurthernewerhighsfortheFleg:
WemaywatchifSensexshowsmaturitysignsatcurrentlevelsandstartscracking.
We considered this alternate scenario when Sensex moved above 200810 highs. It shows corrective phase from 2008
completingasa5leggedAscendingTriangle.Thisscenariocanopenmuchhighertargets,30000+forSensex.
The30000+targetisnothingbut100%(+/25%)breakoutimplicationofthelargestlegoftheTriangle.
AccordingtoNEoWave,correctivephaseshouldconsumemoretimethanthemoveitiscorrecting. After the 56month rally

from May2003 to Jan2008, Sensex has corrected for 67 month from Jan2008 to Aug13, i.e. a larger period as required under
NEoWave.
Wecannotruleoutthatasufficienttimecorrectionisrequiredafteranymultifoldrally.Asshownbelow,suchtimecorrection
canlastforasmuchas161.8%to261.8%timeratiotothemultifoldrally.
Asforthelastmultifoldrallyduring1988to1992,itscorrectionlastedfor262.8%timeratio,from1992to2003.
Wearguedinfavoroflongtermconsolidationphasebeginning2008becausepriorto2008,Sensexhadmultiplied7times
from its 2003 lows. We argued, such multifold rally could results into a multiyear consolidation phase. Inside such a
phase,evenmovesreachingnewhighsareconsidereditsinternalpart,andnotasbreakouts.
Aswenoted,after11foldrallyduring1988to1992,Sensexconsolidatedfor11yearstill2003(261.8%timeratio).Within
this consolidation, Sensex corrected as much as 3060% every time it came closer to previous highs or even after hitting
newhighs.
An ideal suckers rally usually involves making a New High. As we can be seen on the chart below, Sensex moved higher
thanits1992highsduring1994and1997,butreactedbyover30%boththetimes.
Laterduring2000,itbroke1992/1994/1997highs,byasmuchas15001600,onlytolose58%later. After a severe corrective

phase lasting from 2000 to 2003, Index broke 2000 high during 2004 by 100 pts, but even then shaved off 30% before the
nextrallycouldtakeplace.
Allthishappenedbecausethe11yearlong19922003phasewasamultiyearcorrectivephasecorrectingthepreceding11
foldrallyfrom1988to1992.
Onthesupercycledegree,weareconsideringaTerminaldevelopmentsince2003onwards. The Terminal was suspected

becauseits1st wavefrom20032008wasalabel3correctivepattern.(Asagainstanormallabel5Impulsepattern).
The20032008rallywasinternallymarkedasacorrectivepatterncalledaRunningDiametric.
Also,moreimportantly,itisonlyinsideaTerminalthat2ndwavecanbeTriangle.(asagainstthis,inanormalImpulse,2ndwave
cannotdevelopasaTriangle,only4thcan).
Underthecircumstances,ifourassumedFlegcontinuesbeyond13months,i.e.beyondJulAugofthisyear,thenwecould
beforcedtoconsiderthecurrentupmoveasthe3rdoftheTerminalImpulse,aspertheGreenlabelsshownabove.
The basic NEoWave requirement is that such a corrective phase should consume more time than the move it is correcting.
The19922003correctivephase,remember,continuedforatimeratioof261.8%tothepreceding4yearrallyfrom1988to
1992.
As per Wave Theory, a corrective phase shapes up as 3legged Flat/Zigzag, 5legged Triangle or 7legged Diametric (which
basicallycombines2Triangles).
Thequestion,therefore,iswhetherthecorrectivephaseendedasa5leggedTriangleinAug13,ORitwouldcontinuefor2
morelegsandformas7leggedDiametric.
Aswasshownonthechartbelow,alltheupdownlegsfromJan13toAug13,exceptb,consumedexactly2025days,and
formedintoa7leggedDiametric(DiamondShapedvariety).
As per VPs observational rules, all the legs, except b, of a 7legged Diametric tend towards timesimilarity. Indeed, by
reverselogic,whenlegsbegintobesimilarintime,thestructureismorelikelytoformasaDiametric.
Similar to the pattern explained above, on one higher degree, we also observed timesimilarity from 2008. All the legs,
exceptb,consumedabout13monthssincetheyear2008.
The question, now, remains if we continue with the Diametric assumption or complete the post2008 development as a 5legged
Triangle. As we have been explaining, we can open possibility of ending the phase as Triangle only if we see strength
continuingbeyondJulAugofthisyear.
Themarketisbeingmovedmainlyona/cofFIIbuyingheavyweightsselectively,evenasmanystockshavebeentradingnear
previouslowsinthebroadermarket.
Not related to Wave Labels so much on an immediate basis, VPs 30% Principle shows that Sensex is at a risk of 2530% cut
every23years,eversince2004,i.e.inthelast910years.
Inthisperiod,the2530%cutwasseenfromthetopsinMay2004,May2006,Jan2008andNov10sofar.Thelastbottomwas
duringDec11.
Appendix:SuperCycledegreeWavescenariosforSensex
ForSuperCycleDegreewavescenario,considerfollowingASALongTermIndex.ThisIndexhasbeencreatedbycombiningavery
oldIndexcompiledbyaBritishadvisor(from'1938to'1945),withRBIIndex('1945to'1969),F.EIndex('1969to'1980)andSensex
(thereaftertilldate).
Thewavecountpresentedshowsthatthemarketisintothelowerdegree5thoftheSCdegree3rdor5thwave.
The detailed wavecount from 1984 onwards can be seen on the Monthly chart given below. The 24 line shown on the ASA long
termChartabove,andMonthlychartbelow,woulddetermineifthepost1984ImpulseisaSupercycledegree3rdor5th.
SuperCycleDegree3rd (or 5th) began since Nov84. Its internal 3rd was an extended leg, which achieved exactly 261.8% ratio to
the1stonlogscale.TheSensexisnowformingthe5thWave,andthesamecoulddevelopasaTerminal,becauseitslowerdegree
1stwavefromMay03onwardsdevelopedasaDiametric(whichisacorrectivestructure,ratherthananimpulse).Withinthe non
directionallegs,2ndwasexactly61.8%of1stvaluewise,and161.8%timewise.The4thwas38.2%of3rdvaluewise,and261.8%
timewise.
Whilethe4thisshownasa3leggedabcFlatonthemonthlychartabove.Alternatively,the4thisshownasa7leggedabcdefg
BowTieDiametricontheMonthlychartbelow.Thechartbelowalsoshows11yearparallelchannelfromApr'1992toMay'2003.As
shown,ifoneprojectsthewidthofthischannelonupperside,suchaprojectiongave20000astheminimumtarget.Thisforecast
wasachieved.
Asmentionedabove,thelowerdegree1stfromMay2003toJan2008appearstobeaBowTieDiametric,markedasabcdefg. It
is called "Diametric" because it combines two Triangular patterns, one initially Contracting up to the "d" leg, followed by an
Expandingone.Thecontractionpointisthe"d"leg,andthelegsoneithersidesofittendtobeequal.Accordingly,"c"and"e"were
equalin"logscale",bothshowingabout60%gains.Similarly,"g"wasequalto"a",bothshowingabout115%gain.
TheDiametricdevelopmentfrom2003to2008isconsideredtobethe1stwaveoftheImpuse.Duetothecorrectivestructureinthe
1st leg, the higherdegree 5th could be developing as a Terminal. Since 2008, we are into its 2nd wave, which could continue to
developoveraperiodof78yearsbeginning2008.
AsperNEoWave,breakof24lineconfirmsaTerminaldevelopment,andIfthe5thprovestobeaTerminal,theSuperCycledegree
labelof3rdwillhavetochangeto5th,becauseonlya5thofa3rdcannotbeaTerminal.Onlya5thofthe5thcanbeaTerminal.The
SuperCycleDegreemarkingfor1stand2ndasshownonASAlongtermchart,wouldthenchangeto3rdand4threspectively.

Disclaimer:Thesenotes/commentshavebeenpreparedsolelytoeducatethosewhoareinterestedintheusefulapplicationof
TechnicalAnalysis.Whileduecarehasbeentakeninpreparingthesenotes/comments,noresponsibilitycanbeorisassumedfor
anyconsequencesresultingoutofactingonthem.

February 13, 2017

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