NIFTY historical high is a contrarian call. Why do we think NIFTY 8000 is likely? A few reasons, first, price confirmation is the most important indicator.Since the current bear is already primary multi month in nature, we would let prices break the NIFTY 4,500-4000 support zones before looking at the extension of the current bear market. Second, most sector indices monthly momentum (ROC) is not only oversold but also over reactive. This suggests bottoming price structure for most sector indices. Third, the current bear market can be measured for time and price retracement. Did we have enough time and price retracement? From the October 2008 low till Jan 2012 we have completed 39 months. The 40 month Kitchin Cycle is the most conspicuous in stock markets and the best part is that it is almost complete. So prices have retraced in time. In terms of price we are hitting key Fibonacci retracements.
From an Elliott perspective, our ongoing preferred is a running flat, which could bottom near Nifty 4,500-4,000 levels. Running flats happen in strong markets. And if this is the IV cycle wave with a pending V cycle wave up, 38.2% and 50% Fibonacci retracements could complete the formation. If this preferred view is correct we are in for a move to NIFTY 8,000.
If this sounds unrealistic, let's look at the DOW JONES bear market of 1990's and its similarity to the Indian case. First the 1987 crash, a recovery back to 1987 high, a crash again in a flat like formation, followed by a secular multiyear bull run. Nifty’s crash in 2008, recovery back to previous highs and then a crash again, a flat like structure. Any low now would suggest that the multi years trading range is complete and we are in for a multiyear recovery.
Our anticipated cases from 20 Sep 2010 also seem complete. (The Primary Corrective)
Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research