Tech Musings:- Equities

When I wrote my previous post on US Index on October 14^th 2014, SPX was trading at 1906 levels after falling from high of 2020 to a low of 1874. I was expecting a further correction towards 1700 – 1650 levels but that was not to be.

SPX fell sharply from 1906 to 1820 and then bounced back to make new highs above 2020 levels. In a single month SPX saw a 20% movement which had happened for the first time since 1993. It was unusually volatile month for SPX.

If we look at the current chart of SPX nothing has changed. The index is still trading at the upper end of the channel. It is neither breaking the channel on the upside nor correcting on the downside. As per my experience as a technical analyst I think that SPX is just passing its time we will see major movement in the market only in next year. My view on SPX still holds that unless SPX breaks a the channel we are in for some serious correction in the market.

 Nifty had fully achieved the target I have mentioned in my post written on 12^th March 2014. In that post I gave the following predication, “The last chart is the daily chart of Nifty. We can see that Nifty is trading between two parallel channels. Nifty will face resistance at 6700 levels i.e. the upper end of the channel. Once it breaks above 6750 – 6800 the target for this channel come at 8000 – 8200 levels.” 

Nifty is currently trading at  8500 levels and have over achieved the targets I thought it would achieved which themselves looked ridiculously high at that point in time.

If we look at the given chart of Nifty we can see that we are currently critically poised at the upper end of the channel. Three scenarios looks probable from here.

1)      Nifty will break above the channel and will move up towards 12500 levels in next five years.

2)      Nifty will pull back from the channel and will consolidate for a year or more before breaking above the channel.

3)      Nifty will continue to chug along the upper end of the channel and will move up slowly just like S&P is doing.

At this point in time I am not sure which one these scenarios will play out. We will have to wait for market to reveal further moves. 

One sector which is looking exceptionally good is PSU Bank Index. I think we are going to see some fundamental change in the way PSU banks have been managed in last 60 years. I think current government is determined to unshackled PSU banks from government slavery and they will do phenomenally well in coming years.

If we look at the given chart of PSU bank index we can see that it is breaking out of big inverse head and shoulder pattern. Target for this breakout are around 6000 levels or almost 50% higher from here.