Corrective dips to support levels of 15469-15256-15160 can be used for buying. Expect 15778-16301 range to be attained.

Rise to get extended with intra week dips

Last week, the Sensex attained a high of 15683 and against the first yearly target of 15615. The level of 15615 for calendar year 2007 was well identified by us and communicated in the first week of January 2007. The second target for Year 2007 is 20851. Ultimately, it all depends on the course of price movements. Corrections would come and go and the time of occurrence changes depending on the depth of the intermediate corrections. The Sensex took 144 calendar days to move past the earlier top of 14724. The number 144 is a Fibonacci number.

The time that the Sensex spent below 14724 level, which included a falling phase, sideways movement and consolidation, cannot surrender the current rally so easily. Yes, corrections will come and the Sensex can also fall below 14724 but the corrections will create potentially higher bottoms and keep making new highs consistently. Unless we fall below 12300 and the close for the year 2007 is below 12300, then the long-term trend could be damaged. Each breakout after a deeper correction is extending the waves. The 5th Waves are getting extended and extended.

Whenever this leg gets complete, one leg of the major super long-term bull market will get over. Subsequently, we could have a larger and deeper correction but again that would create a launching pad for a super abnormal rally. This entire story could come in existence in a number of years.

In order to get the macro picture, one needs to study the long-term chart of Dow Jones, which has long history of over 100 years. Look at the yearly chart of 100 years, then all the possible answers of a bull market will reveal themselves. The chart has gone through series of World Wars, Great Depression and a few Oil Wars. So many series of negative news flow has come and gone but ultimately the Dow Jones is up making new highs for the entire century. The objective of highlighting this is to indicate what bull markets are all about. Till the long term higher bottom and higher top formation is in tact, the bull market will remain in tact. It depends on what time frame of charts one is looking at. The picture and vision gets wider and larger as one moves from intra-day to daily chart, from daily chart to weekly chart, from weekly chart to monthly chart, from monthly chart to quarterly chart and from quarterly chart to yearly chart.

Last week, the Sensex opened at 15295.03 attained a low at 15160.27 and gained every day to a high of 15683.03. Further, it closed the week at 15565.55 and thereby showed a net rise of 265 points on week-to-week basis. The weekly trend has turned up after the weekly closing on 22/06/07 at 14467 and can turn down on a fall below 14829 during the week or if the Friday weekly closing is below 15113.

Weekly resistance will be at 15778 and 16301. Weekly support will be at 15469, 15256 and 15160. The overall first important target will be at 16172-16301 and the ultimate target would be at 18588. If we take a trend line from the two top of 12671 and 14723, then the trend line value for the next couple of weeks is around 16100-16300. If we take 1.618 upward retracement level of the fall from 12671 to 8799, then the value is placed at 16172, which coincides with the trend line indicated.

It looks that we should be able to move towards 16100-16300 range in days to come. The only question, doubt or fear at this point is that since we have attained the first yearly target of 15615, we could see volatile and erratic movements on intra-day or intra-week basis due to profit booking. Such moves can create tremors for traders. But that does not mean the overall view communicated early will go with the wind.

Review of the Elliot Wave Count to get the broad market picture:

First Count: Wave 1- 2594 to 3758; Wave 2- 3758 to 2828; Wave 3-2828 to 12671; Internals of Wave 3 Wave i- 2904 to 3416 Wave ii- 3416 to 2904 Wave iii- 2904 to 6249 Wave iv- 6249 to 4227 Wave v- 4227 to 12671 Wave 4 Wave a -12671 to 8799 Wave b-8799 to 14723 Wave c-14723 to 12316 Wave 5- 12316 to 15683 (Current up move in progress) Internals of Wave 5 Wave 1- 12316 to 13386 Wave 2- 13386 to 12425 Wave 3- 12425 to 14384 Wave 4- Wav a- 14384 to 13554 Wave b- 13554 to 14683 Wave c- 14683 to 13946 Wave 5- 13946 to 155683 (Current up move- Wave still in progress)

Strategy for the week

Corrective dips to support levels of 15469-15256-15160 can be used for buying. Expect 15778-16301 range to be attained. Traders can think of booking profit or ride the trend till the trend is up. A weekly close below 15133 can turn the weekly trend down.