Now that prices have reached our anticipated target at 18,000 and we are heading into event risk or event volatility, it makes sense to review the complex unwinding Sensex price structure. If 18,000 is broken Sensex is just going to slide lower into 13,500. However, this seems very obvious, as a support breaks and prices fall to a new lower support. For a technician the harder task is to comprehend what is not obvious. Putting in other words to understand where the surprise is going to come from is as important as the path of least resistance.
This is why an alternate view is significant just like the Elliott preferred view. So now that we have stated the preferred view. Let’s discuss the eventuality that Sensex 18,000-17,500 holds for a multi week period. In such a situation we have to look at the larger picture. The larger picture for us, as we mentioned prior in ‘The Primary Corrective’ is a cycle degree flat. We think the large B primary is over and now we are in a C down. Remember it's the C waves that are the fastest and most damaging. There are advantages of a C also, it’s a trending move compared to the complexity and overlapping behavior of A and B waves. Finally we just might get to see some trend, after the complexity and deviousness of B primary wave from Mar 2009.
C waves can be assumed to be straight and clear (the preferred view). The C wave we are assuming in the alternate case is more of a C from a Running Flat. And this C could also be an ending overlapping diagonal. If this is happening, we might see 4 wave getting into territory of 1 wave back into 19,000 before starting the collapse till 13,500. This is an aggressive projection, but if the ongoing formation is a running flat than a correction till Sensex 16,500 is not only less but also disproportionate in the overall cycle degree structure from 2007. Markets are about proportion and surprises. What may happen may be something else, but till prices don't breach 17,500 on the downside and 19,000 on the upside, the anticipated running flat with an ending diagonal down into May-Jun 2011 remains a key alternate for us. And in case Sensex fails to break below 16,500 this year. We will move to scenario II highlighted in ‘The Primary Corrective’ published on 20 Sep 2010.
The good part of the alternate projection till 13,500 lows is that we are headed into another multiyear accumulation opportunity that should take markets up well into 2012-2015. Remember a running flat only happens because the trend behind the market is strong.