Weekly Technical Analysis

21 Oct 2013

- By Vivek Patil, India's foremost expert in Elliot Wave Analysis

Top Stories of the Week Sensex up 1.7%, testing '2008-2010 highs. CBI names Kumar Mangalam Birla in Coal Block allocation case. Supreme Court orders CBI to probe 6 cases of criminality in Radia Tape case. Former MD & CEO of NSEL arrested.

Sensex testing '2008-2010 highs, watch next 4 days as the rally is slower so far [Technical readings carried forward from previous weeks are shown in italics. Readers can easily identify the new arguments which are written in regular font] Last week we discussed, the recovery above 20050-100 (Nifty 5950-60) has now resulted in recent action turning into an Inverse H&S formation, with its Neckline near 20050 marked in Yellow This only indicates Bulls having an upperhand we may see selective, tricky, volatile, ranged or even +ve actions until we see faster retracement of a rallying nd segment, something that can suck the last buyer into the market Our contention that the current rally is c-leg of 2 Corrective inside x could be challenged if Sep13 High of 20740 (Nifty 6143) is crossed in faster time The bias is currently +ve, and would remain so until the action closes below Fridays gap -up area we may allow 1-2 day more for a move above Sep-High of 20740 (Nifty 6143). Failure to achieve that, followed by weakness below Fridays gap-up area, could be a -ve sign .. The truncated week (Wednesday was Id holiday) saw Sensex touching Sep13 high of 20740 on Tuesday. However, it reacted lower till Thursday, but only to bounce back fro m previous Fridays gap-up area on the last day. At the end of the week, the net close was higher by 354 pts or 1.7%.

The heavyweight Metal/Oil&Gas Indexes outperformed with 3.4% gain each, but the broader Indices like BSE SmallCap and Mid-Cap Indexes under-performed, gaining less than half a percent during the week. By avoiding closing below preceding Fridays gap -up area, and by holding the Grey rising channel enclosing last 11 days action, the Index maintained the +ve bias as argued. Despite Bulls having an upper-hand, it took 9 days to retrace the preceding 8-day fall from 19 Sep to 1 Oct. We may, nd therefore, maintain the existing label for the rally as c-leg of the 2 Corrective inside x. The action on Friday closed above the Sep-13 high of 20740, the level that had proved resistance on Tuesday. The action forced Bears to run for cover, and attracted last buyers, typical of distribution phase we argued for. While pivotals attracted buying support and short-cutting, the broader market under-performed, as compared to Sensex. The latest segment of rally from 1 Oct has now completed 11 days so far. Compared to the preceding Aug -Sep th th rally from 28 Aug13 to 19 Sep13, however, the current rally appear slower, as was pointed out last week also. The preceding rally had measured 3291 pts from 17449 to 20740 in 15 days. As against this, the current rally, so far, measures 1667 pts in 11 days. The current rally, thus, measures only 50% price in 75% time in comparison . If the current rally cannot add 1624+ pts in the next 4 days, it would remain a slower rally. Indeed, this may open a possibility that the development post Aug13 is an Extracting Triangle. An Extracting Triangle is a 5-legged pattern with rallies getting smaller and drops bigger. The current rally (from st 1 Oct), being slower, could be c-leg inside this development, as per labels marked in White color on the Daily chart.
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We may, accordingly, trade with +ve bias, but watch if the rally gradually fizzles out in the next 4 days, and breaks its Grey channel enclosure. The up-trend could have different connotation only otherwise. Last week, the Sensex formed the 3 Bull candle in a row on its Weekly chart, and closed near its previous highs of 2008 and 2010. That attracted tremendous attention from the players. The question to ask from here would be if the last buyer has finally bought into. It is generally seen that after the last buyer gets sucked into, the market is more likely to correct by as much as 30% (some times even 55-60%). The following picture of the 1992-2003 phase is self-explanatory :
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As we can be seen on the chart, Sensex moved higher than its 1992 highs during 1994 and 1997, but reacted by over 30% both the times. Later during 2000, it broke 1992/1994/1997 highs, by as much as 1500-1600, only to lose 58% later. After a corrective phase from 2000 to 2003, Index broke 2000 high by 100 pts , but even then shaved off 30% before the next rally could take place. This happened because the 11-year long 1992-2003 phase was a multi-year corrective phase correcting the preceding 11fold rally from 1988 to 1992. We had argued that multi-fold rallies require multi-year consolidation phases to absorb the excesses during the multi-fold rallies.

Since the Sensex multiplied 7 times during 2003 to 2008, we argued it could require a multi -year consolidation, probably lasting 7 years from 2008, and such a consolidation would, accordingly, end only after 2015 . The basic NEoWave requirement is that such a corrective phase should consume more time than the move it is correcting. As per Wave Theory, a corrective phase shapes up as 3-legged Flat/Zigzag, 5-legged Triangle or 7-legged Diametric (which basically combines 2 Triangles). The current phase from 2008 onwards is correcting the 56-month move from May2003 to Jan2008. It already has continued for 69 months from Jan2008 till now, i.e. more time than the move it is correcting. The question now is whether the corrective phase would end as a 5-legged Triangle (already into 5 leg, i.e. E) OR would it continue for 2 more legs and form as 7-legged Diametric. On a basic level, a move above 2008 highs would be required to justify and modify the corrective phase from 2008 onwards from 7-legged Diametric to a 5-legged Triangle, where E ended at Aug13 lows. By alternative thought process, it was suspected that the development from Jan13 to Aug13 was a 7-legged Diametric as was shown on the chart below. As per VPs observational rules, all the legs, except b, of a 7 -legged Diametric tend towards time-similarity. Indeed, by reverse logic, when legs begin to be similar in time, the structure is more likely to form as a Diametric. As was shown on the chart below, all the up-down legs from Jan13 to Aug13, except b, consumed exactly 20 -25 days :
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By the same logic, on one higher degree, we had observed all the legs, except b, each consumi ng about 13 months since the year 2008. As was shown on the chart below, the fall from Jan08 to Mar09 was 13 months, and the same was labeled A of a large 7 legged Diametric formation. The B leg from Mar09 to Nov10 consumed 20 months. As argued, B leg can different timewise. The C leg (from Nov10 to Dec11) as well as D leg (from Dec11 to Jan13) maintained the time similarity, each consuming 13 months exactly. Under the circumstances, it was thought fit that the larger formation from 2008 onw ards to be a 7-legged Diametric formation.

This long-term picture was published on 6 Feb12. The Diametric assumption also compared well with the 11-year formation previously seen during 1992 to 2003. The question, now, remains if we continue with the Diametric assumption or complete the post-2008 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 above 2008 high of 21207 (Nifty 6357). Currently, therefore, we are toying with the idea that the up-move from Aug13 lows is either x wave inside still forming Complex Corrective inside E, OR its F leg of the Diametric (where E was the shortest leg instead of usual D) . The market is being moved mainly on a/c of FII buying heavyweights selectively, even as many stocks have been trading near previous lows in the broader market. Examination of FII buying over the last five years since 2008 shows that the Sensex has not been able to cross its 2008 high despite additional investment of 369901 crs by the FIIs in this period. The disparity between Sensex and broader market was shown on the comparative chart below :

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While the Small-Cap Index broke below its Dec11 lows, and is now attempting to recover abov e the same, the Sensex itself is found struggling at the upper end of the channel shown on the following chart :

This year, Sensex has made several attempts to break the upper end of the channel shown above , but each time it reacted lower. In case +ve options, Sensex may make another attempt towards the upper channel, but the move would still be part of the x. The larger structural +ve scenario can open only if the Index breaks / sustains above this channel . Such a move could also mean larger E ended in 8 months and F is opening. It was argued that after a 7-fold rally from 2003 to 2008, Index may form a 7-year long consolidation phase from 2008 onwards, which could end only after 2015. To consume the required large amount of time, we thought a 7-legged Diametric formation would fit the bill, just like it did during 1992-2003. If each leg of the Diametric consumes about 13 months, and so far all legs (except B) since 2008 did consume 13 months, it would amount to 7-year+ as consolidation phase. Not related to Wave Labels so much on an immediate basis, the 30% principle shows that Sensex is at a risk of 25-30% cut every 2-3 years, ever since 2004, i.e. in the last 9-10 years. In this period, the 25-30% cut was seen from the tops in May2004, May2006, Jan2008 and Nov10 so far. The last bottom was during Dec11. Sensex has now completed 22 months since then without a 25-30% cut.

Even in case the Sensex opens +ve options in the short term as discussed, we should keep the 30% principle in the back of the mind, and act as required when the time comes.

The price-potential was based on the assumption that x would be part of a Double Three like pattern, wherein x can st retrace 1 corrective by 100%. With the help of different heavyweights, Sensex has been attempting to take out 2008 highs for the last five years, but failed every time. Even during the current year, three such attempts were made, mainly with the help of ITC, but Index failed. Despite all that, the broader market has kept itself suppressed. Indeed, BSE Small-Cap and Mid-Cap Index both shaved off over 30% during 2013. Further many investors stocks touched 2008 lows or even lower levels. Some of the favorite stocks from PSU / Infrastructure virtually turned into penny stocks. Under the circumstances, the market does not appear running away. The long-term 7-8 year consolidation should continue in the broader market, if not on Sensex itself.

The recent supportive effort was seen protecting the Grid level near 17800 which was shown on the following chart. The upside Grid is at about 20250. Since Jan13, Sensex kept reacting lower from the Grid level at 20250, and later dropped to the lower Grid level at 17800. As we noted, VPs 2450-point Grid System, thus, continues to provide important turning points since the year 2008. As was suspected, the Dollar-Rupee equation keeps guiding the movement of the stock market. The recent high of th Dollar, at 69.23, achieved our projections made on 24 Jun13.

In the Weekly Report dated 24 Jun13, it was argued that the Dollar-Rupee equation has an inverted relationship with Sensex. Based on the Wave-structure shown, it was contended that : The year-long consolidation phase from Jun12 to May13 on the Dollar-Rupee chart looks like a 3 Extension 5 Failure Terminal. On one higher degree, the Terminal could be part of an Irregular C-Failure Flat from Jan12. If true, then as per NEoWave principles, Dollar can achieve 67 by Aug14. As per NEoWave, after an Irregular C-Failure Flat, the next move should usually achieve 161.8% ratio to its b leg from the end-point of c. Time-wise, this projection is usually achieved within the total period consumed by the Flat, i.e. within 16 months from Apr13. We may, therefore, keep an eye on the Dollar-Rupee equation during the coming week as well, and watch if the Sensex keeps moving in a direction opposite to Dollar-Rupee. Remember, the projected level of Rs.67 was the minimum level to be achieved by Aug14. It was argued that in actual terms it could reach higher than 67. On the Sensex chart, we had assumed that a major top was made during Jan13 as per Jan -Topping Cycle. As it has been a totally polarized and selective market, the BSE Small and Mid-Cap Indexes shed over 30% each during 2013. Indeed, this time the broader market has been leading the bearish sentiment even while Sensex was holding higher with the help of few heavyweights, mainly ITC. While Sensex consists of 30 stocks, the BSE Small-cap universe comprises 459 and Mid-Cap 233 actively traded
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stocks. While Sensex universe mostly comprise institutional holdings, broader universe affects the small investor . We had already followed a cautious approach near the 6 year highs. Earlier during Jan13, based on the Jan-Topping Cycle (explained elsewhere in this report), we had warned of a major cycle top. Since Jan13, major damages were seen in the broader market as well as many individual stocks and sectors .

Multi-Year long Diametric Formation It was argued that all multi-fold rallies would be followed by multi-year long consolidations. Sensex, remember, rose 11-fold during 1988 to 1992, but entered a 11-year consolidation thereafter. Again, during 2003 to 2008 it multiplied 7 times. Drawing similarity, it could a 7 -year consolidation starting 2008. Further, the consolidation, may shape up like a 7-legged Diametric, similar to the consolidation seen from 1992 to 2003. The Diametric formation from 2008 is also suspected because each of its internal legs, except B, have consumed about 13 months so far. So, the E wave from Jan13 could also continue for about 13 months, and end somewhere around Feb-Mar14.

This long-term picture was fist published on 6 Feb2012, with both D legs highlighted in Purple color rectangles. In the previous instance, the D leg during 1996-97 had retraced as much as 97% of its preceding C leg. In the current instance, D retraced 84% of C. Long-term corrective phase on Dows chart from the year '2000 onwards also appears to be a probable 7-legged

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Diametric. Instead of Bow-Tie Diametric on Sensex, Dows Diametric is shaping up as Diamond-Shaped Diametric.

Jan-Mar Topping Cycle During Dec12, it was pointed out that major tops occurred during Jan-Mar period in the last 13 years. More than half the times, the top also occurred during the month of January . Based on this, it was argued that Sensex could hit a major top during Jan13, and it did. Substantial damage was, however, seen mainly in the broader market.

This cycle may be the result of NAV pop-up exercise in the last month of the Calendar Year. Jan13 was the 7 such top forming in the month of Jan.

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Performance of the Broader Market The broader market has, generally, under-performed the main Index since the year 2008, as can be checked on the chart below.

Indeed, the broader Mid-Cap and Small-Cap Indices have also broken 0-b lines (Red color lines) of the upward D leg. The Small-cap Index even broke its Jun12 levels, and gave a faster retracement to the c part of post -Dec11 rally. Indeed, while the Sensex itself retraced 89% of it preceding 13-month fall from Nov10 to Dec11, BSE Small-Cap Index retraced only 38.2%, and has, in fact, reacted heavily from this retracement level. The divergence between Sensex and broader market appears to be Index management activity, as the Sensex is held by the Index heavy-weights, while the broader shows distribution. This whole thing, however, made for a tricky and uncomfortable trading environment.

NEoWave Discussions Inside the D leg from Dec11 to Jan13, we had had assumed a 3-legged a-b-c Flat. The c part was a 5-legged Impulse, th inside which, 5 leg (beginning Nov12) was assumed to be a Terminal. Based on NEoWave requirements, it was argued that Sensex would drop below Nov12 lows in 50% time of the 48-day long Terminal. Index eventually did drop below Nov12, but took 48 day or 100% time (instead of 50%). As an abundant precaution, therefore, following alternate wave-structure was suggested for the D leg from Dec11. D is now completing 161.8% time ratio to C.

In the alternate scenario, c ended at Oct12 high, and it was equal to a leg. The d was the smallest segment, and e (i.e. post-Nov12 rally) was a Double Combination which ended in Jan13. The post-Nov12 rally is retraced by 100% on Sensex, but more than 100% on broader indices. The larger picture of Diametric from 2008 onwards is, therefore, considered probable. That would mean 13-month long D-leg has ended at Jan13 highs, and 13-month long E-leg started thereafter. NEoWave, remember, allows exceptions to rules at important market turning points or under unusual conditions, like end of larger patterns or last wave, such as a Terminal. Also, Triangles and Terminals are exceptions to virtually all rules. Since Diametric pattern is made up of Triangles, NEoWave Exception Rule is also applicable to these patterns . Since we were at an important turning point in Jan13, and dealing with Terminal and legs of Diametric, perhaps pattern implication rules could not be satisfied to the full extent. Does it really matter whether the Sensex achieves the pattern implication accurately within the time-price parameters, when the general direction of the secular market has been largely -ve as we suspected since Dec12 ? As we argued, the larger bear phase is already visible in the broader market. Since Dec12 we turned cautious as the rallies were getting smaller (shaping into a Terminal), and also because of the Jan -topping cycle (discussed separately). Terminal we assumed from Nov12 to Jan13, is a special kind of Impulse which occurs in the last wave position , i.e.

either as c of Flat/Zigzag or 5 of an Impulse. Its internal structure is made up as 3-3-3-3-3, instead of usual 5-3-5-3-5. In other words, each leg of a Terminal would develop as a 3-legged or 5-legged corrective structure, like a Flat, th nd Zigzag or Triangle. Also, 4 of Terminal must enter the area covered by the 2 (Overlap Rule). A line similar to the 2-4 line on Sensex can also be drawn on the broader indices, and the same has been broken (as discussed separately). Sensex, consumed 59 weeks to retrace 84% of its preceding 13-month fall, which also was a 59-week affair, as shown on the chart below :

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The rally, accordingly, was considered slower, corrective structure as per NEoWave, and not as part of any fresh rally. The channel enclosing the a-b-c Flat inside the larger D leg from Dec2011 onwards was shown on the chart below :

The 80% retracement level was considered and marked as a pattern implication for the 13-month long Double Combination move marked as C. Pattern implications, however, cannot be strictly enforced for the legs of Triangle and Diametric, which are exceptions to the general rules. As per NEoWave, most channeled moves enclose a Complex Corrective structure involving x wave. Complex Corrective involving 2 correctives, joined by one x wave, is called a Double Combination, and carries a pattern implication of not more than about 80%. Note that the C leg of Sensex, from Nov10 to Dec11, was a Double Combination, with two equal -sized correctives (see weekly chart given above), and therefore, carried a pattern implication of 80% retracement by the D leg. Further, as depicted on the chart below, since Nov10, it has been generally useful to consider 61.8% to 80% retracement area as crucial for terminating moves.

As per Wave Theory, Flat is a 3-legged corrective pattern marked as a-b-c, where b corrects more than 61.8% of a. It is also a 3-3-5 pattern where a and b carry corrective label of :3, and c is an impulse label of :5. Around a Flat, we usually draw a line joining 0 and b (0-b line), and take a parallel from the a point. The c leg should normally end near such parallel. The channel indicates similarity of its 3 internal legs, reason why Flats are called Flats. Inside c of D (beginning Jun12) for Sensex, we were expecting a 5-legged Impulse, because Flat is a 3-3-5 structure. As per NEoWave Extension rule, one of the directional leg inside an Impulse should get extended, i.e. achieve 161.8% ratio to the next largest leg. Since 1 and 3 were normal, we could have projected 5 wave Extension. However, such a move would project values slightly above the Nov10 highs, which would jeopardize the larger assumption of Bow -Tie shaped Diametric from 2008 onwards. We, therefore, preferred 5 of c not to achieve 161.8% ratio, but terminate below Nov10 highs, from where a downward E would open. Since E begins the expanding phase of the Bow-Tie Diametric, it would break below Dec11 lows. The 1 and 3 inside c of D continued for about 4-5 weeks each. We expected 5 to consume a similar time, and end somewhere in the month of Dec12 or near to it.
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As the beginning part of 5 shows violence on upside, we suspected 5 could develop internally as a 1 Extension Impulse or Terminal. Since a Terminal always occurs at major turning point, it would be able to generate the necessary downside power for the larger E leg. In the 7-legged Bow-Tie shaped Diametric from 2008, one can see a reduction in magnitude from A leg to D leg. The D leg is the smallest segment of the Bow-Tie shaped Diametric. The other half of this Diametric, i.e. E-F-G legs, should show expanding magnitudes, and therefore, E should become larger than the D leg. This can happen only when E breaks the bottom Dec2011. After breaking the 13-month long channeled C (from Nov10 to Dec11), we had suspected that development post Dec11 has potential only to be marked as D leg of a much larger Triangle or Diametric from 2008. This option was preferable because C leg from Nov10 was not an Impulse. A Non-impulsive C leg could only be part of a larger Triangle or Diametric.

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BSE Dollex-30 Index Meanwhile, since the FII activity turned a prominent factor in the Indian stock market, we examined the development of BSE Dollex-30 Index, which showed a Head & Shoulders formation around Oct12 on its Daily chart. Its downsides later achieved the Head-to-Neckline projection on downside, as we expected. Since the projection level also matched with its 200-day EMA, we suspected some pull-back. It did pull back till Jan13. This Index achieved H&S protection and has now recovered above its 200-day EMA.

Yearly lows Sensex has broken 2010 low of 15652, and now in 2012 is found holding the 2011 low of 15136. As the past instances would show, once the yearly low gets broken, a minimum of 20% cut from the low has been a usual phenomenon, though gradually. A 20% magnitude reduced from 15652 would calculate to about 12500 for Sensex. This level has not been touched so far, but should be remembered as a crucial level which matches with the huge gap-up action (refer to the Weekly chart discussing 32-week cycle) seen during the 2009.

32-Week time cycle The development since Mar09 has followed a 32-week time cycle, as shown on the chart below.

This was used for raising a possibility that an important low would be formed around 20 Aug11. Sensex th responded by hitting the bottom on 26 Aug. This cycle had also raised the possibility of an upward/sideways phase that could survive for 32 weeks from Aug11, th st and end either on 4 Feb12 or 31 Mar12, developing as a ranged movement like the Left Shoulder. The upward phase ended during Feb12 as per this cycle. Going by the structural possibilities from this cycle, it was suspected that Sensex could be forming an e leg of a possible Extracting Triangle, which would remain smaller than the c leg. The e leg did remain smaller as suspected. As we already know, Extracting Triangle is a pattern which shows smaller rallies and bigger drops. Thus in one direction, it shows e < c < a, and in the opposite direction, it shows d > b. Above 18000, Right Shoulder became bigger that the Left Shoulder, which appeared rejecting the Head & shoulders or Extracting Triangle argument. However, the 32-week time cycle may remain valid as a cycle even from here. The Sensex was seen testing the Neckline shown on the chart, which did prove crucial, as Sensex bounced several times from the Neckline. Another idea would be to mark the entire development as a Diametric, instead of Extracting Triangle, and the same is now marked on the chart. These assumptions indicate an incomplete B, but confirms only on faster drop below the Neckline, which is still awaited.

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Recent recovery happens to be exactly at 32-week cycle turning point.

30% Principle All major tops are characterized by 30% drop from the top value. This is normal not only inside a bear phase, but is commonly seen even inside a bull phase too. The 30% taken out from the current top value on Sensex (21109) would be less than 14800. The total loss so far, from the high of 21109 to 15425, measures around 28% so far . However, on BSE Small-Cap and MidCap Index, the loss from 2010 high does measure more than 30% . Overall, it was argued much earlier, that we would see a topping formation spread over 2-3 month period beginning Oct10. This played out well as suspected. Indeed, as was observed, 60% of stocks topped out during Oct10 itself, and many have already shaved off much more than 30%, though Sensex itself shaved off only 28%.

2450-point Grid chart for the Sensex Sensex has been following a Grid of 2450-2500 points since 2008. These Grids are shown on the Weekly chart of Sensex below. One can find a bottom or a top getting formed at each of the Grid levels. Index during 2013 reacted thrice from the Grid level at 20250, and is now protecting the next lower Grid level at 17800.

The larger picture Our markets, remember, has seen multifold rallies previously, each time continuing for about 4 (four) years, after which, it usually enters a multi-year consolidation phase. In other words, long-term has always meant 4 years in Indian context. Remember, Sensex rallied 11-fold from 390 (Mar88) to 4546 (Apr92) in four years, after which it consolidated for 11 years from 1992 to 2003. In 2008, it completed another 4-year rally from 2003, during which Sensex rose 7-fold from 3000 levels to 21000. It may now consolidate for 7 year, beginning 2008, preferably forming as a Triangle or Diametric. We explained that the 14-month fall from Jan08 was a Triple Combination A leg of a large multi -year consolidation. The corrective phase beginning Mar09 retraced about 99% of the previous fall from 21206 (Jan09) to 8867 (Mar09), (which was labeled as a Triple Combination). The longer time required while rallying is symptomatic of its corrective label of B. The rally from 8047 (actually beginning at 8867) was, therefore, considered as the B leg. The next leg downwards nd would be labeled as C. Such a-b-c development since Jan08 would be considered part of the 2 wave of what appears as a probable Terminal beginning 2003. Even though we saw the market reaching levels above Jan08 highs, the multi -year consolidation is expected to shape up like a large decade-long Diametric, looking similar to the consolidation we saw from 1992 to 2003. Our

trading/investment strategies should be designed accordingly. The suspected corrective phase beginning Jan08 would be the 2 wave within the larger 5 wave. This 5 wave is st suspected to be forming as a Terminal due to absence of impulsive behavior in its internal 1 wave. The Terminal confirms when the Sensex drops below the 2-4 line of one higher degree. One may see the Yearly chart in Appendix, which shows the 2-4 line and its values for the next three years. Remember, Terminal development usually violates the 2-4 line. The Sensex is assumed to be under the influence of a large 8-year cycle ever since its birth. As shown on the chart below, '1984 was the beginning of 8-year long bull-run till '1992. In our Super-Cycle Degree count, shown on ASA Long-Term chart under a separate paragraph, weve considered 1984 as the beginning point for the most dynamic 3rd wave. The next two important turning points occurred exactly 8 years thereafter, in '1992 and '2000. Both these turning points were marked by stock market scams, because of which, the leaders of the rally had extremely difficult time later. For example, ACC, the leading stock of '1992 bull market, remained below its highs till end of '2004. Similarly, the IT stocks, which were leaders of '2000 rally, lost as much as 90% of their top valuations by the year '2003. During 2008, we were sitting on this very important cycle, which therefore, threw up similar possibilities. In the previous 8-year cycle top during 1992, Sensex lost 57% from 4546 to 1980. In the next cycle top, the cut was almost 58% from 6150 in 2000 to 2594 in 2001. We had, accordingly, targeted sub-10k levels for Sensex price-wise during 2008-09, and a minimum of 13 months into bear phase, time-wise. The price-time targets were achieved as Sensex dropped 63% from 21206 to 7697. The yearly channel, shown below, which was used earlier to project 20000 level for the Sensex during 2007, was broken when the Index moved below 17200. Break of this long-term channel also weighed in favor of a larger corrective phase following this 8-year cycle.
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Appendix : Super-Cycle-degree Wave-scenarios for Sensex For Super-Cycle-Degree wave-scenario, consider following ASA Long-Term Index. This Index has been created by combining a very old Index compiled by a British advisor (from '1938 to '1945), with RBI Index ('1945 to '1969), F.E Index ('1969 to '1980) and Sensex (thereafter till date).

The wave-count presented shows that the market is into the lower-degree 5th of the SC-degree 3 or 5 wave. The detailed wave-count from 1984 onwards can be seen on the Monthly chart given below. The 2 -4 line shown on the ASA rd long-term Chart above, and Monthly chart below, would determine if the post 1984 Impulse is a Super -cycle-degree 3 or th 5 .

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Super-Cycle-Degree 3 (or 5 ) began since Nov84. Its internal 3 was an extended leg, which achieved exactly 261.8% st th ratio to the 1 on log scale. The Sensex is now forming the 5 Wave, and the same could develop as a Terminal, because st its lower-degree 1 wave from May03 onwards developed as a Diametric (which is a corrective structure, rather than an impulse). Within the non-directional legs, 2nd was exactly 61.8% of 1st value-wise, and 161.8% time-wise. The 4th was 38.2% of 3rd value-wise, and 261.8% time-wise. While the 4 is shown as a 3-legged a-b-c Flat on the monthly chart above. Alternatively, the 4 is shown as a 7-legged a-bc-d-e-f-g Bow-Tie Diametric on the Monthly chart below. The chart below also shows 11-year parallel channel from Apr'1992 to May'2003. As shown, if one projects the width of this channel on upper side, such a projection gave 20000 as the minimum target. This forecast was achieved.
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. As mentioned above, the lower-degree 1 from May2003 to Jan2008 appears to be a Bow-Tie Diametric, marked as a-b-cd-e-f-g. It is called "Diametric" because it combines two Triangular patterns, one initially Contracting up to the "d" leg, followed by an Expanding one. The contraction point is the "d" leg, and the legs on either sides of it tend to be equal. Accordingly, "c" and "e" were equal in "log scale", both showing about 60% gains. Similarly, "g" was equal to "a", both showing about 115% gain. The Diametric development from 2003 to 2008 is considered to be the 1st wave of the Impuse. Due to the co rrective st th structure in the 1 leg, the higher-degree 5 could be developing as a Terminal. Since 2008, we are into its 2nd wave, which could continue to develop over a period of 7-8 years beginning 2008.
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As per NEoWave, break of 2-4 line confirms a Terminal development, and If the 5 proves to be a Terminal, the Superrd th th rd th th Cycle-degree label of 3 will have to change to 5 , because only a 5 of a 3 cannot be a Terminal. Only a 5 of the 5 can st nd rd be a Terminal. The Super-Cycle-Degree marking for 1 and 2 as shown on ASA long-term chart, would then change to 3 th and 4 respectively.

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