The charts are slowly turning for better (in favor of Rupee), as you can see.
FIIs selling halts a bitThe important hallmark of this bear market has been heavy withdrawal by FIIs. The following monthly chart of FII Net Investments shows a clear break of the 14-year long Monthly channel.I have shown an equidistant parallel on downside, value of which indicates that we may see more withdrawals to the tune of Rs. 30000 crores. Some positive ticks were seen on this chart during the week however.
The 8-Year Cycle
A much bigger cycle is the 8-year cycle. As shown on the chart below, '1984 was the beginning of 8-year long bull-run till '1992. In my Super-Cycle Degree count, shown on ASA Long-Term chart under a separate para, I have, in fact, taken ‘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, wherein 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, had lost as much as 90% of their top valuations by the year '2003.
This year, we are sitting on this very important cycle, which therefore, may throw up similar possibilities.
A much bigger cycle is the 8-year cycle. As shown on the chart below, '1984 was the beginning of 8-year long bull-run till '1992. In my Super-Cycle Degree count, shown on ASA Long-Term chart under a separate para, I have, in fact, taken ‘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, wherein 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, had lost as much as 90% of their top valuations by the year '2003.
This year, we are sitting on this very important cycle, which therefore, may throw up similar possibilities.
Alternative scenarios for Sensex As far as larger wave scenario is concerned, I have been explaining two alternatives :
The first one assumes that a large Triple Combination corrective, beginning Sep'1994 got over in Oct'2005 at 7656. The last corrective within this Complex Corrective phase formed as a "Non-Limiting" Running Triangle, the breakout from which has already occurred. This has been my preferred scenario for many years. (Remember, Non-limiting Triangles, as the name suggests, do not impose any limit on the post-pattern behavior). This scenario also combines well with the traditional channeling technique. Sensex followed a parallel channel for 11 long years from Apr'1992 to May'2003. As I had shown, if one projects the width of this channel on upper side, such a projection gave 20000 as the "minimum" target for Sensex. The same has been achieved already.
The first one assumes that a large Triple Combination corrective, beginning Sep'1994 got over in Oct'2005 at 7656. The last corrective within this Complex Corrective phase formed as a "Non-Limiting" Running Triangle, the breakout from which has already occurred. This has been my preferred scenario for many years. (Remember, Non-limiting Triangles, as the name suggests, do not impose any limit on the post-pattern behavior). This scenario also combines well with the traditional channeling technique. Sensex followed a parallel channel for 11 long years from Apr'1992 to May'2003. As I had shown, if one projects the width of this channel on upper side, such a projection gave 20000 as the "minimum" target for Sensex. The same has been achieved already.
As per the alternative bearish scenario, a Diametric had been developing into Sensex' 5th leg of impulse. In this alternative, the 4th wave ended at May'2003 low near 2904. The 5th leg, being a non-extended wave of the Impulse, should not have gone much beyond 61.8% ratio to the 3rd, which projected a maximum of 13300. In this argument, the 5th wave was assumed to be the "non-extended" leg within the Super-cycle degree 3rd which began at 259 in Nov'1984 as shown below. (in an Impulse pattern, only one directional leg can be the extended leg.) As per this wave-structure, the 3rd (of the 3rd) was shown to be the extended leg, which achieved exactly 261.8% ratio to the 1st on log scale. The 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, as shown below.
There are good ratios present within different waves, as explained on the chart, to support this scenario. However, the Sensex sustaining well above 13300 may lead to a "Double Extension" scenario even by this alternative, wherein both 3rd as well as 5th would be extended waves.
There are good ratios present within different waves, as explained on the chart, to support this scenario. However, the Sensex sustaining well above 13300 may lead to a "Double Extension" scenario even by this alternative, wherein both 3rd as well as 5th would be extended waves.
The development into 5th wave was read as a "Diametric" formation. It was explained that the well-channeled legs, with a subsequent correction of less than 61.8%, led to the suspicion of a "Diametric" formation. (Remember, channeled moves usually indicate complex correctives, which should normally get retraced by more than 61.8%, except within the new pattern called "Diametric"). Diametric formation has 7 legs, marked as a-b-c-d-e-f-g. It is called a "Diametric" because it combines two Triangular patterns, one initially Contracting up to the "d" leg, followed by an Expanding one, thereafter. 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% gain. Similarly, "g" achieved equality to "a", both showing about 115% gain. This Diametric could be taken as the 1st of the 5th (5th, which, due to its corrective structure, could be developing as a Terminal wave). This Diametric in the 1st leg of probable Terminal wave appears to have ended at 'Jan'08, and we may be looking at the 2nd wave downwards within this Terminal. 
