Cyclists are also technicians, if we consider the fact that they are also looking for seasonality pattern in prices. As studying Time gathers momentum among chartists, Time studying techniques will evolve. One of the old methods to spot seasonality is just going there and spotting it.

Here we have illustrated the INR Q4 indicator. Q4 has been a strong inflexion time for INR. From 1990 till 2002, after every Q4 prices have seen primary year long weakness. This seasonality changed polarity from 2002 till 2008 (INR strengthening) and now from 2008 INR Q4 is in a seasonality of weakness. This Q4 inflexion has only failed twice in 20 years. We have assumed the neutral cases where INR was flat over the duration as correct.

What is the reason this weakness seasonality may persist? One simple reason is the unbroken 0.618 Fibonacci support at 44. Price confirmation is king. Till INR breaks 44 low we continue to look atleast at a multi month weakness on INR against USD, even if not primary. Above this we don't see the move down from 2009 top as a clear five. Markets have enough capability to burn time in stagnation or weakness. The ongoing complex corrective could just persist till H1 2011. What does this tell us about equity? This tells us that Nifty VIX broad basing formation should not be ignored as equity could surprise early 2011. And since we are in larger complex corrective in Indian equity also, performance cycles (relative performance) should be used to reduce out of overstretched sectors and accumulate into best potential outperformers.

Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research