It’s a Bear hug!
Last week, the Sensex opened at 36274.25, made a high at 36616.64 and fell to a low of 34202.21 before it closed the week at 34376.98 and thereby registered a fall of 1,850 points on a week-to-week basis (a fall of 5.1%).
Last week, we saw a breakdown below 35800 which resulted in a slide to 34202. The Sensex tested the support level of 34302 before it closed at 34376.
The huge single day fall witnessed on Thursday and Friday dented the market for a deeper fall. The Sensex may slide towards 32483. The fall was catastrophic hinting at a bear market.
The rise from 22494 in March 2016 to 38989 in August 2018 was terminated in 5 waves with a fast and furious fall, which violated the trend line and channel. The trend line and channel is shown in the graph published over the last few weeks. The same chart shows the breakdown on the bar chart. Retracements of the rise from 22494 to 38989 are placed at 32565, 30680 and 28716. Expect 32565 to be tested as it coincides with the swing bottom of 32484 (March 2018).
The breakdown is visible on the chart leading to resistance at higher levels. A pullback, if any, from the current level of 34376 or above will create lower tops that will be time consuming conforming to b-structure. Resistance will be at 35065-35928. The lower range for the week can be 33513-31099.
September 2018 ended with a bearish candle and a lower high and lower low for an important swing top. October 2018 is responding to the bear call and crushing the bull. The Sensex is likely to test the Monthly Reversal Value (MRV) of 33004.
The July-September 2018 quarter is over and the Sensex displays an inverted hammer, which suggests that the upside may be locked for the near-to-short-term and puts pressure on support clusters.
The quarterly candle saw a follow-up slide in the first few days of the new quarter, which opened the bear market call. The quarter has just begun and it could hit the lower level first before making any strong moves of reversal. The bear market correction had a timeline of 9-12 months, 9-15 months and 18-38 months. The longest time-wise correction was from 1992 to 2003 but this may not happen now as the typical characteristic of such a phase is political instability which does not exist currently.
The Sensex peaked in August 2018, which means the correction could get into May 2019. 2019 is the election year and historically an election year tends to make major bottoms for the long-term. Corrections of such magnitude are from 25%, 38% and 55%, which can create a significant damage. Therefore, the Sensex having broken the 35000 mark will have to make a quick recovery to safeguard itself from the bears. The bears seems to be in complete control and trading short position stop loss of intra-day are strengthening the confidence of the bears. A recovery from 33000 can still repair the damage if the Sensex moves above 35000 soon. But as of now, the bears have taken control.