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.

Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research