Slide 1 : Future is Past entered from another Gate..
Nooresh Merani
Stages of a Bear Market : Stages of a Bear Market Stage 1: A sharp drop which surprises everyone on the street and is large in magnitude.
Stage 2: A Pullback which creates an illusion and retraces back to 50/61%.
Stage 3: Breaks the low of sharp drop and a channeled move to new lows to find a bear market bottom. ( this is a point of recognition of the bear market)
Consolidation : Consolidation The next phase is mostly a sideways or with contraction of downmoves. ( Sloping wedges / triangles or horizontal ranges).
The sideways move would be characterized by low activity and lacklustre moves.
The breakout move then continues with a Breakout ( Big Signal ) With a higher high and higher bottom pattern formation.
Pictoral depiction of Bear Market : Pictoral depiction of Bear Market
Historic Examples- Sensex 2000-2003 : Historic Examples- Sensex 2000-2003
Sensex 2000-2003 : Sensex 2000-2003 In the bear phase after 1992 top Sensex took around 13 months and after the 2000 top it took around 19 months.
The consolidation phase later on took around 6 -7 months in the 1992 correction and around 19 months in the 2000 correction before markets gave a good breakout signal.
In the last 2 corrections markets have lost around 55-60 % from top.
The major returns are generated only after the big buy signal. The consolidation can take a longer time also.
Sensex 2000-2003 : Sensex 2000-2003 2000-2003 was the longest bear market Sensex had. The consolidation was around 19 months.
Although there was a bounce of 45% from the lows the action remained lackluster in the period. Market gained almost 100% or more in the next 6-7 months on the big buy signal.
So a major move comes only after the consolidation phase. So investors have two options, one is to buy and build a portfolio in the consolidation phase of which length is not known or wait for a major signal some months down the line.
Historic Examples- Dow Depression : Historic Examples- Dow Depression
Slide 9 : In the Dow depression the crack was around 89-90% from peak in the Dow Jones index over 3 years.
This was the most extreme case of stock market correction time and price wise.
So continue to wait for a turnaround and a big buy signal to become aggressive.
Current Status- Crude : Current Status- Crude
Current Status- Crude : Current Status- Crude Crude may have found a panic bottom around 33 levels. We can see retest of lows around 10-15% lower in worst case.
The difference between two subsequent months contracts is almost 4-10$ nowadays. This thing was noticed around when crude spiked in expiry around 130s from 110.
In the next few months we could see crude consolidating in a triangle /wedge or sideways pattern before making a reversal.
This process of consolidation could take lot many months. But it can be comfortably said the downside in crude is limited although contango could increase around expiry week.
Current Status- Sensex : Current Status- Sensex
Current Status- Sensex : Current Status- Sensex Sensex might have seen the panic bottom in October but we could also see a re-test to around 10-15% lower. This could be part of a consolidation and may make a sloping wedge also like it happened at the top.
7200 and 6500-6200 ( 2000 and 2004 top zone ) are the worst case support levels in case of a new low and this would be opportunities to buy stock specific in the broader market.
On Fibonacci time basis corrections could last 8-13-21 months. We are close around the 13-14 month which is an uncertain period just like Sept-Oct ( 8-9th month) .
Current Status- Sensex : Current Status- Sensex So in the next few months we can test lower levels of 7200-7700 or even 6200-6500 in the worst case. Lower the bottom longer would be the consolidation phase.
It seems in the next few months the index may not give a clear picture of broader market has gone down and not participated well in the bounces. Many stocks are quoting at a 6k index already.
Yet again investors have the option to build a portfolio slowly in a structured manner in next 6-9 months or wait for a big buy signal to become aggressive.
Sensex – Long Term : Sensex – Long Term
Sensex – Long Term : Sensex – Long Term The long term bullish pattern remains intact till above the red line with a possibility of reaching the upper dotted line in next 5-10 years. ( comes to around 6000-6500 ). On a super-cycle Elliot wave count this line remains important.
Sensex has been testing the breakout lines of 2005 which was a major breakout out of a 13 year flag pattern.
Sensex has actually seen the first bull phase of 5 years ( 2003-2008 ) in the 13 year cycle and could consolidate over the next 1-2 years starting from Jan 2008 before emerging into a much bigger bull phase if we compare to what happened with Dow Jones in 1980s.
Flag Pattern : Flag Pattern
Dow Jones in 1980-2001 : Dow Jones in 1980-2001
Dow Jones – flag calculations : Dow Jones – flag calculations Bottom in 1942 for the pole = 93
High of 1966 pole top = 1001
Flag breakout = 1080-1100
Pole size = 900 odd points.
As this is a multi year pattern we would have to consider the size in percentage basis and not absolute. So accordingly pole size is 1076 % or 10.76 times and Flag size is 2.03 times.
Sensex 2003 -2008 : Sensex 2003 -2008 Dow Jones had a rally ( 770 to 2746 ) from 1982 to 1987. It topped out after a rally of 60 months.
Sensex had a rally ( 2934 to 21200) from 2003 to 2008 . It topped out after a rally of 57 months.
So if we find that both the bull rallies had a 5 year cycle before correcting.
Sensex has a pole size of 40 times and 13 years so we may not be follow Dow Jones cycle similar in size and time but the pattern could match up in next few years.
Sensex 2009 -2018 : Sensex 2009 -2018 Dow Jones took around 24 months from top to hit a new high in 1992.
Sensex has come down to test the lows of the flag whereas Dow Jones index managed to make a reversal much before that ( 12500 was a analogical level ).So consolidation could take longer and a new high much longer.
But we would definitely be much higher from 6-8k in the next 3-5-8 years ideally as the major and bigger part of the 13 year cycle still awaits India. ( Technically upper dotted line plots to 50-70k+ we can consider lesser though)
Current Status- Dow Jones : Current Status- Dow Jones
Current Status -- SNP 500 : Current Status -- SNP 500
CurreNT Status - FTSE : CurreNT Status - FTSE
Current Status- Hang Seng : Current Status- Hang Seng
Current Status- BRAZIL : Current Status- BRAZIL
Time Analysis - Sensex : Time Analysis - Sensex
Slide 28 : THANK YOU …
Nooresh Merani
09819225396
( noorrock2002@gmail.com , meraninooresh@yahoo.com )