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Technical View on Nifty (NSE) and Sensex (BSE)

We got a VERY big SELL signal yesterday for the S&P (SPX) and I am taking some major short positons which we expect to have on for a few weeks - perhaps for the better part of the summer.

I mentioned last year (about 8 months ago) how 2009 was following the same pattern as the market in 2003 - similarly we are following 2004 so far in 2010

in a nutshell in 2004 we set a high in mid jan then had a big 7% sell off into mid/late Feb - we did the same this year.  In 2004 we then regained all those losses and got a slighlty higher high in March/April (it was less then 1% above the Jan highs).  Then we sold off fairly hard and while we had some bounces - we eventually set a low in July / August 2004 and it was about 12% +/- off the highs.  Which would put us in the 1020 - 1040 area IF we follow a similar pattern.

All signs point to a deeper correction
The S&P 500 resistance at 1055-1065 was respected and the uptrend line in
place since the July low has been broken. Short-term indicators are approaching
oversold levels, but intermediate indicators remain overbought. More importantly,
our volume models remain negative - the Volume Intensity Model (VIM) continues
to point to more selling than buying. On October 1 the market sold off sharply
generating a 90% down day on higher volume – another sign the market is under
distribution (selling). Breadth is also not supportive with our advance-decline line
diffusion indicator never confirming the recent recovery highs. Risk measures,
such as the EURJPY currency pair, are pointing to further de-risking, and the ratio
of stocks versus bonds now clearly favors bonds.

Someone posted this in the live chat and I thought it was interesting.  While I'm not politically active nor would I say I am a member of a particular party this really surpised me to see this.

Once again, market proves to be as crazy as a fox when it comes to volatiliy. Usually as the volatility picks up, it rarely ends with a big rally. Normally at some point you get the capitulation phase and big down, then its done. I think we are close to that capitulation point, should happen in the next few weeks.