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My coin toss is better than EW.....(Searching for coin).

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The low at 9911 achieved my long-time target below 10K, which I had promised on 18th Jan of this year. This was purely a technical call based on the 8-year cycle I had discovered. Detailed explanation on this cycle study is given separately. This cycle shows a cut of 55-58% from the respective top value. In the previous 8-year cycle top during ‘1992-93, Sensex lost 56% from 4546 to 1980. In the next cycle top, the cut was almost 58% from 6150 in ‘2000 to 2594 in ‘2001. I, accordingly, argued that in ‘2008 we are sitting on such a cycle, and therefore, from its ‘Jan high of 21206, Sensex may drop to sub-10000 levels. With last week’s low at 9911, this forecast is met.

Remember, technical analysis “always” provides a guidance much ahead of fundamentals, not only at the tops but also at the bottoms. Now that the economic fundamentals have “officially” gone bad, technical analysis would provide right signals at a right time soon.

Sensex’s immediate support area is at 8799-9875, which matches with the significant lows it made during ‘2006.

Time-wise, I argued, “‘… such a phase would last for at least 13 months (beginning Jan2008), and may require consolidation thereafter, before the next bull phase can begin. As long as Sensex keeps on making lower highs, the bear phase continues.”

While the value target below 10K has been achieved, the time targets are still to be achieved. Remember, in technical analysis, both time and price forecasts must be achieved.

- By Vivek Patil, India's foremost expert in Elliot Wave Analysis

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The action over the week generated two gap-up moves, with Sensex finishing close to the upper end of the falling channel we had been following over the last eight weeks. With two gap-up moves already in place within last week's rally, Index is now preparing to take on the 10K-mark and move beyond the 8-week long falling channel.

Another gap-up from here would be the 3rd gap-up action within the current rally, which will have potential to prove as an “Exhaustion” gap. Whether it indeed turns out to be so, will be proved within the first three trading sessions of the week.

Sensex has shown strength by rallying beyond two days. All previous rallies within the channel had lasted for only two days. The current rally is also the biggest rally so far in the last eight weeks in terms of magnitude. Further strength would now be shown by crossing the channel.

With the Sensex gaining as much as 28% from its low of 7697 already, it indeed proved as a short-term reversal we were looking for.

The technical position, however, will soon reach the over-bought zone. We may, therefore, consider 10260-10787 area to be maximum upside for the time being, and look for gradual profit-booking at higher levels if required.

In case the rally matures at 10260-787 area, we may see it testing 50% or 61.8% correction levels to the rally, or downsides of about 9000 again. Such a correction may see a formation of higher bottom however.

Remember, we haven’t seen any falling segment getting fully retraced in faster time so far. Such a correction may give the Sensex a chance to generate such a full and faster retracement

- By Vivek Patil, India's foremost expert in Elliot Wave Analysis

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Remember, once we see a 3rd or 4th gap-up in any move, its always better to be cautious, as technical position reaches an over-bought zone.
This turned out to be a nice 42% rally in just 6 trading sessions, and was the strongest rally so far since ‘Jan. It not only proved my contention for a short-term reversal, but also generated decent profits under the circumstances.

Remember, however, profits would have been trimmed or even disappeared if we did not have the profit-booking policy in place. I had, accordingly, advised a gradual profit-booking on long positions.

The current rally from 7697 10945 was the biggest and the fastest first segment of all bear market rallies since ‘Jan this year. Examine the previous rallies :

(1) The rally from 15332 (22nd Jan) to 18491 (29th Jan) was 21% in 5 days.

(2) The rally from 14677 (18th Mar) to 16452 (28th Mar) was 12% in 6 days.

(3) The rally from 12514 (16th Jul) to 15130 (24th Jul) was 21% in 6 days.

Time-wise, all the first segments lasted for about 5-6 day, and the same was the case for the current rally as well. Technically, we were able to enter as well as exit at the right time. It was purely on the basis of this time observation.

Price-wise, further examination of all the first segment of rallies since ‘Jan, shows that :

1. The ‘Jan rally got corrected by extent of 34%.

2. The ‘Mar rally was corrected by 64%.

3. The ‘Jul rally was corrected by 53%.

Remember, all of these correction levels are close to the Fibonacci ratios.

If the ensuing correction can hold to Fibonacci correction levels to the rally, then it can also turn out to be a medium term reversal. The 38.2% - 50% - 61.8% Fibonacci correction levels would work out to 9704 - 9322 – 8940, and the same have been marked on the chart.

Levels around 10116 can be seen as crucial in the immediate short term, as the same were the lows for last Monday/Tuesday. For opening further upsides, therefore, we need to see a strong action above 10116, and even a close above it. Such a follow-up would confirm the support at the 38.2% level to the 6-day rally from 7697 to 10945. This will be our bull case scenario.

In case the Sensex takes support at the Fibonacci correction levels marked, the short-term reversal we were expecting since last week, can turn out to be a medium-term reversal, which will not break last week’s low of 7697 till this year-end. Why ?

The weekly chart shows why Movement since ‘Jan shows a particular pattern for the current bear phase, at least so far. Sensex shows falling segments lasting for 10 to 11 weeks, which are then followed by rallying segments lasting anything from 4 to 7 weeks.

- By Vivek Patil, India's foremost expert in Elliot Wave Analysis