Future is Past entered from another Gate..

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• Future is Past entered from another Gate..
• Nooresh Merani

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Stages of a Bear Market

• Stage 1 A sharp drop which surprises everyone on
  the street and is large in magnitude.
• Stage 2 A Pullback which creates an illusion and
  retraces back to 50/61.
• Stage 3 Breaks the low of sharp drop and a
  channeled move to new lows to find a bear market
  bottom. ( this is a point of recognition of the
  bear market)

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Consolidation

• The next phase is mostly a sideways or with
  contraction of downmoves. ( Sloping wedges /
  triangles or horizontal ranges).
• The sideways move would be characterized by low
  activity and lacklustre moves.
• The breakout move then continues with a Breakout
  ( Big Signal ) With a higher high and higher
  bottom pattern formation.

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Pictoral depiction of Bear Market
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Historic Examples- Sensex 2000-2003
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Sensex 2000-2003

• In the bear phase after 1992 top Sensex took
  around 13 months and after the 2000 top it took
  around 19 months.
• The consolidation phase later on took around 6 -7
  months in the 1992 correction and around 19
  months in the 2000 correction before markets gave
  a good breakout signal.
• In the last 2 corrections markets have lost
  around 55-60 from top.
• The major returns are generated only after the
  big buy signal. The consolidation can take a
  longer time also.

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Sensex 2000-2003

• 2000-2003 was the longest bear market Sensex had.
  The consolidation was around 19 months.
• Although there was a bounce of 45 from the lows
  the action remained lackluster in the period.
  Market gained almost 100 or more in the next 6-7
  months on the big buy signal.
• So a major move comes only after the
  consolidation phase. So investors have two
  options, one is to buy and build a portfolio in
  the consolidation phase of which length is not
  known or wait for a major signal some months down
  the line.

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Historic Examples- Dow Depression
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• In the Dow depression the crack was around 89-90
  from peak in the Dow Jones index over 3 years.
• This was the most extreme case of stock market
  correction time and price wise.
• So continue to wait for a turnaround and a big
  buy signal to become aggressive.

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Current Status- Crude
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Current Status- Crude

• Crude may have found a panic bottom around 33
  levels. We can see retest of lows around 10-15
  lower in worst case.
• The difference between two subsequent months
  contracts is almost 4-10 nowadays. This thing
  was noticed around when crude spiked in expiry
  around 130s from 110.
• In the next few months we could see crude
  consolidating in a triangle /wedge or sideways
  pattern before making a reversal.
• This process of consolidation could take lot many
  months. But it can be comfortably said the
  downside in crude is limited although contango
  could increase around expiry week.

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Current Status- Sensex
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Current Status- Sensex

• Sensex might have seen the panic bottom in
  October but we could also see a re-test to around
  10-15 lower. This could be part of a
  consolidation and may make a sloping wedge also
  like it happened at the top.
• 7200 and 6500-6200 ( 2000 and 2004 top zone )
  are the worst case support levels in case of a
  new low and this would be opportunities to buy
  stock specific in the broader market.
• On Fibonacci time basis corrections could last
  8-13-21 months. We are close around the 13-14
  month which is an uncertain period just like
  Sept-Oct ( 8-9th month) .

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Current Status- Sensex

• So in the next few months we can test lower
  levels of 7200-7700 or even 6200-6500 in the
  worst case. Lower the bottom longer would be the
  consolidation phase.
• It seems in the next few months the index may not
  give a clear picture of broader market has gone
  down and not participated well in the bounces.
  Many stocks are quoting at a 6k index already.
• Yet again investors have the option to build a
  portfolio slowly in a structured manner in next
  6-9 months or wait for a big buy signal to become
  aggressive.

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Sensex Long Term
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Sensex Long Term

• The long term bullish pattern remains intact till
  above the red line with a possibility of reaching
  the upper dotted line in next 5-10 years. ( comes
  to around 6000-6500 ). On a super-cycle Elliot
  wave count this line remains important.
• Sensex has been testing the breakout lines of
  2005 which was a major breakout out of a 13 year
  flag pattern.
• Sensex has actually seen the first bull phase of
  5 years ( 2003-2008 ) in the 13 year cycle and
  could consolidate over the next 1-2 years
  starting from Jan 2008 before emerging into a
  much bigger bull phase if we compare to what
  happened with Dow Jones in 1980s.

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Flag Pattern
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Dow Jones in 1980-2001
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Dow Jones flag calculations

• Bottom in 1942 for the pole 93
• High of 1966 pole top 1001
• Flag breakout 1080-1100
• Pole size 900 odd points.
• As this is a multi year pattern we would have to
  consider the size in percentage basis and not
  absolute. So accordingly pole size is 1076 or
  10.76 times and Flag size is 2.03 times.

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Sensex 2003 -2008

• Dow Jones had a rally ( 770 to 2746 ) from 1982
  to 1987. It topped out after a rally of 60
  months.
• Sensex had a rally ( 2934 to 21200) from 2003 to
  2008 . It topped out after a rally of 57 months.
• So if we find that both the bull rallies had a 5
  year cycle before correcting.
• Sensex has a pole size of 40 times and 13 years
  so we may not be follow Dow Jones cycle similar
  in size and time but the pattern could match up
  in next few years.

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Sensex 2009 -2018

• Dow Jones took around 24 months from top to hit a
  new high in 1992.
• Sensex has come down to test the lows of the flag
  whereas Dow Jones index managed to make a
  reversal much before that ( 12500 was a
  analogical level ).So consolidation could take
  longer and a new high much longer.
• But we would definitely be much higher from 6-8k
  in the next 3-5-8 years ideally as the major and
  bigger part of the 13 year cycle still awaits
  India. ( Technically upper dotted line plots to
  50-70k we can consider lesser though)

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Current Status- Dow Jones
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Current Status -- SNP 500
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CurreNT Status - FTSE
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Current Status- Hang Seng
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Current Status- BRAZIL
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Time Analysis - Sensex
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• THANK YOU
• Nooresh Merani
• 09819225396
• ( noorrock2002_at_gmail.com , meraninooresh_at_yahoo
  .com )