During the week, Index initially moved higher by 412 points to touch 15579.Sensex expectedly faltered and lost 893 points by the end of the week. The net close was lower by 443 points or 3%.
The hesitation at target levels was shown by the break of 20-day long Green trend line I’ve shown on the Daily chart. Also, two gap-up actions (on 6thth Aug) closer to our target area, were completely covered.
The hesitation confirmed when the last segment of rally (from last Friday’s low of 14888 to Tuesday’s high of 15579) was completely retraced in faster time. On its weekly chart, Sensex formed a bearish Dark Cloud Cover pattern.
Weakness below 14175, continuing after 2 days of trading, would bring the Diametric assumptions in play. Diametric assumption, as I argued, stemmed from the weakness in the structure, as the rally from 13727 to 15579 had taken 161.8% time to achieve 75% magnitude compared with the previous rally from 12514 to 15130. A drop below 14175 would confirm further weakness in the structure by making the current drop (from last week’s high of 15579) bigger than the previous fall from 15130 to 13727.
Therefore, choice of structure for the rally, whether it’s a Zigzag or a Diametric, will depend on whether the Sensex holds around 14100 or not. Short term consequences will follow accordingly. Zigzag will be bullish, as its “c” leg will move higher. Diametric will be bearish as “d” leg can drop to 13727 or even lower.
Time-wise, I had argued that since the fall from 17735 to 12514 (in what was labeled as the “a” leg of 2nd corrective) had consumed 10 weeks, the current corrective phase (“b” of 2nd) should form over 10 weeks or preferably more.
If the “b” of 2nd (or what I called as bear market rally post-12514) consumes lesser time than 10 weeks, then the larger structure within the 2nd
Also by rules, the Complex Corrective fall from 17054 to 12514 which was actually a Triple Zigzag, can occur only as the largest leg of Triangle (or Terminal). This has already suggested Extracting Triangle into 2nd wave position after “x”. and 11 corrective can also go into the realms of Extracting Triangle or Diametric, which are the only alternative configurations which allows “b” legs to consume lesser time.