Before I begin,

I have copied and pasted Vasantha’s and Rajeev’s post first for entirety

NIFTY with Elliot wave counts.......do post your comments......

We seem to be in 5th Minor of the 5th Intermediate of the 3rd Primary. This counting would suggest that we could be in a prolonged
corrective mode lasting 1-2 years from 2006 onwards for the 4th Primary after which ofcourse there would be another bull phase (the 5th
Primary Wave) lasting 3-4 years.

Though the counting has the draw back of not satisfying the established rules for Intermediate Waves. For example Inter 1 was 356 and Inter
3 was 1094.65 ie., 3.07 times of wave-1 (an extended 3rd wave) and the wave 5 till now has been 1293.40 which is 3.63 times of wave-1.
For an extended 3rd wave the 5th wave is generally either 0.62 times or 1 time or 1.62 times of wave-1. This rule has been exceeded.
A close up would reveal that we also in Minuette iv of Minute 5. When market starts its upmove from minuette iv then we would in minuette v
of Minute (v) of Minor 5 of Intermediate 5 of Primary 3 suggesting a mother of all recent corrections could be coming some time next year or
end of this year. Atleast a very sensible thing to do would be to get out of small and senseless mid caps at the earliest opportunity and
continue to stay away from them.

Low of 1st Minor wave was 1292.20 on the famous 17th of May last year and high of 1625.70 giving a wave length of 333.50. Minor Wave 3
was 2120.15 this Jan 4th travelling from 1437.90 in the last week of June giving a 3rd wave length of 682.10 which is 2.05 - also an
extended 3rd Minor wave just like the 3rd Inter. Minor Wave 5 as of now has been 2585.60 - 2300.45 = 285.60 which is 0.85 times the
wave-1 already. Hence the next targets will be either 333.50 or 1.62 times of it (ie., 540.27) giving us the targets of 2633.95 or 2840.72.

Considering that both Dow & Elliot theories suggest that waves can be sub-divided but they do take similar form of the major waves it is just
possible that we may be looking at an extended 5th wave for Minor, Minute and Minuette waves also similar to the 5th Intermediate wave.
The wave calculations for the Minute wave is given on the chart itself. There is an error where the peaks whose values are given are that of
Minute waves buy wrongly mentioned as minor waves. Here 3rd Minute wave topped at 2426.65 against the target of 2364.50. Actual was
reasonably closer to the target and the 5th wave targets are 2630 or 2833 or 3163.
The hourly chart given below reveals that we seem to have completed sub-minuette impulse c of the corrective minuette [iv] and with the
retracement having been 38% we could be soon be getting into the upmove [v] of minuette.
Minuette wave calculations are also given on the chart which gives an extended 3rd wave similar to 3rd Inter (4.04 times against the target of
4.25 times) and hence targets for wave 5 are 2587.35 or 2655.95.
Targets for 5th wave of ;

Minuette are 2587 or 2656

Minute are 2630 or 2833 or 3163
Minor are 2634 or 2840

2587 would be a possible double top level. But considering that the bigger Intermediate wave was an extended 3rd and an extended 5th -
both on the time & wave length point of view and by the established rule that sub-waves take the form of the major waves we could be
looking at 2833-2840 as & when the strong resistance level between 2630-2655 is crossed. If a target of 2833-2840 is to be
achieved, it logically follows that the market may need to form a stronger base around the current levels suggesting a violent (volatile) wave-
4 correction in the Minuette wave. If that so, then we could very well be looking at a prolonged Minuette [iv] of the irregular 5 waves type
(similar to the 4th Minute wave we had in Aug - take a look at the hourly chart given above).
FIIs are well protected with their F&O stock futures transactions given below - monthwise abstract of total value of futures bought & sold in
that contract period. It may be noted that in this period their Open Interest position increased from 4797 Cr at the end of May contract to
10485 Cr as on the 23rd - only in stock futures. Because of the way the pending open interest position is estimated by the NSE (by taking the
closing price of that particular day and by making the logical assumption that what is bought by FIIs in futures goes up in price and what is
sold by them goes down in price - you see otherwise would make them as idiots and we know they are not !!!) then the net end of month
bought position is overstated and sold position is understated. In other words their short position would be way higher than given below.

Their short / hedged position would further indicate higher degree of volatility failing which it would be very difficult for them to get in or get
out of their futures position. In other words, there seems to be a stronger possibility of a violent corrective minuette wave 4.......

My suggestion would be to fully hedge one's futures position by buying CALL or PUT as the case may be and not by writing them.....it just
might be a little easier to sit / sleep / eat / have ...
inaddition to offering the opportunity of playing the market on both sides..........

gv
Rajeev’s Chart
Here’s my reply, rather late, but hopefully not lacking in substance.

First, let me mention the few ground rules which I have used in the following analyses :

1. I have tried to zoom out from the large scale count to the smaller scale, as is the conventional practice.
2. I have deliberately tried to reduce degree titling to a bare minimum for the following reasons :
a. IMHO Degree isn’t really relevant to the following analyses.
b. Degree titling would make a rather simple analysis more complicated and alienate the non-Elliottician reader with all the Elliott
gibberish concerning degree titling.
3. Charts have been prepared manually without the use of any Elliott wave analyzing softwares and are to the best of my knowledge
conforming to all the rules of Elliott that I am aware of.
4. I have used BSE Sensex data from 1979 for daily and weekly charts and S&P CNX Nifty intraday data for detailed markings (for lack of
sensex intraday data)
Firstly, the largest degree preferred count remains the same as has been widely held for several years now. I don’t find any need to change it
for the time being; though an alternative is available with minor modifications. I would prefer to reserve the same for the time being as any
further analysis of alternate counts at this point would largely be hypothetical.
The Super cycle degree Wave 3 started from April 1983 and lasted for more than 11 years to finish at September 1994 as indicated in the
above chart. The consensus Super Cycle degree Wave 4 started in September 1994 and is presumed herein to be still under completion.

This presumed Super Cycle degree Wave 4 corrected the wave 3 adequately by price and time. This Super Cycle Wave 4 developed as a
complex corrective involving a flat, an extracting triangle and an assumed running triangle.
The most obvious question to an Elliott non-conformist would be how to determine where the Super Cycle Counts start. The primary reason,
amongst many others, why the rise indicated as Supercycle Wave 3 has been marked so, is because the market action of the previous four
years were clearly corrective in nature and were correcting some previous motive wave which was unrecorded as the Sensex wasn’t
constituted then. Also, the end of the SC Wave 4 in 1994 wasn’t adequately retraced by the ensuing market action indicating that the
September 1994 top wasn’t the end of a Grand Super Cycle Impulse. Basic analysis… visible to the slightly experienced eye, and also
confirmed by other data like the RBI Shares Index.

The SC Wave 4 has developed as a Complex correction lasting more than 11 years, consisting of a Flat, Extracting Triangle and a Running
Triangle contained classically within a parallel slight rising channel. ‘a’ leg of the flat of SC wave 4 corrected 0.618 of the preceding SC Wave
3. Also, the entire move has lasted just a tad over 11 years thus indicating adequate price and time correction.

Given below are a series of charts of the 2003 rally, 2004 crash, subsequent rally in 2004, and the market action in 2005.

The Running Triangle indicated as the third corrective of SC Wave 4 is a very powerful pattern. It has been seen in some of the most massive
wealth-creating moves in financial market history. The late 1970s bull market (bubble) in Crude is believed to be triggered by a running
correction. (I am unable to substantiate the same by any charts as the data isn’t available) The 1990s monster bull run in Dow Jones
Industrial Average is widely believed to be triggered by a running triangle beginning that crash in Oct-Nov 1987 when the Dow tanked nearly
30% in 3 weeks. ‘a’ legs of triangles are the among the most violent of all Elliott patterns. This crash is very similar to the May 2004 crash
where the index lost more than 17% in more than 2 days. In both cases, the ‘crash’ was correcting a rather sharp rise preceding it. In both
cases, we had a price correction between 0.50 and 0.618 of the preceding upmove. In both cases, the ensuing upmove was slower and more
laboured… but laid the base for a large monster bull market. It is my humble submission that we will see something similar unfolding in our
scenario.

Running Triangles are patterns preceding major fundamental shifts in public perception and market dynamics. Running corrections are a
potent indicator of the strength of the market in the direction of the trend. It is akin to a rocket launch, where the rocket to be fired is
elevated before being fired. Much the same with the markets so that even in a very bearish scenario the markets do not retrace back to the
levels where they started off with thus interfering with the normal progession of the markets. So its my humble advice to the reader to not
dismiss the same as humbug.
Dow Jones Industrial Average Weekly chart
Now that I have indicated a larger degree perspective, in the following section, I am detailing the market moves of the last 3 years which are
still fresh and in recent memory.

The Year 2003 Rally

The 2004 Bottom and the subsequent rally : Slower retracement of even supposedly failed moves
The 2004 Rally : Complex Correction Rally
Market Action in First Half of 2005 : Irregular Flat
The 2005 Rally
The Sideways Action in August 2005
The Entire Running Triangle
Vasantha and Rajeev and others,

Now that my blah-blah is over, let me try and analyse the charts posted by you and its veracity and possible implications.

This chart posted by you is the most bearish count I have seen and can imagine at this point in time. It completely negates the hypothesis
that we have broken out of a 11 year long parallel channel, as the post pattern implication for this count would be very bearish. Just imagine
a minimal 0.382 retracement of the Primary wave 3 and u will know what exactly I are talking about. Too bearish surely. Does it merit
attention as an alternative bearish count. Maybe. But then it kills all the points I have indicated earlier in the analysis.

All the impulses that u and Rajeev have marked have flaw/s :

1. There is no confirmation from the internal structure of any of the supposed impulsive patterns as indicated in my previous charts
2. There is no evidence of extension. This alone would be sufficient to dismiss most of the counts suggested.
3. There are no specific standard internal or external Fibonacci relationships between the motive waves of the same degree.
4. There is no evidence of typical channeling of any type of impulse.
5. There is no evidence of post pattern market confirmation of an impulse…. Namely a) Decisive eventful Break of 2-4 trendline and b)
Retracement of the 5th wave in quicker time than it took to form.
6. The Wave 2s have retraced way too much… though the maximum retracement of wave 1 by wave 2 is 99%, it is seldom seen so. In
fact, according to Neely’s rules, a retracement of greater than 61.8% would mean that the retracement is only ‘a’ leg of a larger
flat/zigzag where the ‘c’ wave would invariably fail and bottom around 0.618 retracement of wave 1. Such a scenario in any case is
rare. It is advised to the budding neo-wavist to think of alternatives when a assumed wave 2 retraces more than 0.618 of assumed
wave 1.
This was not mentioned in Prechter’s initial analysis. But his subsequent discourses have indeed mentioned this important distinction
and in all his subsequent analyses, I believe Prechter has ensured that a greater retracement by Wave 2 isnt responsible for an
erroneous count.
The wave marked as end of 2nd minor has in fact retraced more than the entire length of wave 1 minor. Even Prechter would agree
that is not allowed.

Secondly the internal structure for wave 1 is corrective and wave 2 is impulsive. Something surely wrong there. If at all u had to mark
a Wave 4 Minor, it should be where the Minute Wave ii is indicated where in Wave 4 Minor would be an irregular flat.
This chart is incomprehensible. The Minute Wave 4 is an a-b-c-d-e? I am assuming contracting triangle. If yes, then it couldn’t be
more incorrect. The e leg is the largest wave of the ?contracting triangle. Surely not allowed. IT HAS TO BE THE SMALLEST LEG.

Further more,

a. Each leg of a contracting triangle should retrace a minimum of 0.382 of the previous leg.
b. There should be a minimum of 3 legs which retrace more than 50% of the preceding leg.
c. ‘d’ leg has to be smaller than ‘c’ leg.
 d. ‘e’ leg should terminate in a territory which is in a range of 0.618 of the longest wave counted from the middle of that wave.
e. The ‘a’ and ‘b’ legs rarely if ever relate by equality or even by a Fibonacci number.
f. Either the ‘a’ or ‘b’ legs are usually the longest leg of a triangle. The c leg is very infrequently, though possible, the largest leg
of a contracting triangle.

Wave iii overlaps the Wave i price territory. In other words, the Wave iii breaks the 0-ii trendline. Surely not allowed.
Lastly my good friend Rajeev’s chart.
I don’t wanna rubbish this much… knowing Rajeev, he wont agree with me! In essence, he wont agree with basic construction rules of Elliott
Wave Theory. But still would call his charts as Elliott Wave Counts. They could as well be called Rajeev Wave Counts as they completely
disregard basic rules and tenets of Elliott Wave Theory! ☺

I had pointed out the obvious discrepancies in a previous mail. On closer inspection I am able to find a few more…

1. Wave 2 (marked in green) has a very shallow retracement of Wave 1. The minimum I believe is 20% if I remember Prechter well.
2. Also internal structure of wave 2 is actually a triangle ☺ Now Prechter is getting furious isn’t he? For those, who don’t know… Elliott
Wave Theory doesn’t allow Wave 2 to develop as a triangle.

I could go on and on… but I wish to avoid any confrontation with people whom I have learnt a great deal from.

LONG TERM OUTLOOK :

Vasantha, I believe in your chart, you have marked the 1999 bottom as Wave 1. If that is indeed the start of the larger Super Cycle / Cycle
Wave 5… just ponder a moment and think about the possible long term implications of this.

If we are indeed in a SC/S W5, the internal structure suggests that the wave 5 should develop as a Terminal (Ending Diagonal in Prechter
terminology 3-3-3-3-3) as all the motive waves seem to be corrective. Now, a terminal can only be an unextended wave. If its so, it means
that W5 would be an unextended wave. The maximum target for an unextended wave is 0.618 of Super Cycle / Cycle Wave 3, which works
out to around 13,000 on the sensex in the log scale. THIS WILL BE THE ABSOLUTE TOP. The terminal would be followed by a very long bear
market lasting more than 20 years which would retrace the whole extent of your Wave 5 from 1999 bottom. That is a scenario which I cannot
even imagine. Maybe, people in their early 20s like me don’t have enough cynicism and skepticism about the India Shining story… maybe
with age, I might become a bigger bear. But for now, I have the optimism that much higher targets for Sensex, and consequently for
companies higher market capitalizations would be achieved. I cant imagine Sensex coming back to 3000 levels in next 10-15 years.
Rajeev, your count has the same implications… only difference is that u have marked the beginning of SC/C W5 from 2004 bottom. The
implications don’t change one bit except for extended time targets.

It is my humble submission that the best is yet to come. We are in a long term bull market. Like the Dow in 40s and 50s and again in the 80s
and 90s or the Nikkei in the 1980s and 90s or Hang Seng in the early 1990s. It wont peter out so soon. All fundamental indications point to
the same. And a 13,000 target is just about 50% from here. A miserly peanuts targets to call a SUPER CYCLE top. Complex corrections are
notorious for their Impulsive mimicking behavior. This group isn’t the only one arguing about this impulsive vs complex corrective debate. It
has happened at various points in time all over the world in various markets. So no need to be disheartened.

When an impulse happens, trust me… u and me and even the panwala will know it. An impulse is said to be the easiest pattern to spot on a
chart… and indeed it should be. But only if the rules governing the same are used correctly. Or else this debate will continue for a very long
time.

Writing this ‘thesis’ has taken a hell a lot of effort on my part. I would think all that is in vain if Vasantha, Rajeev and all the others reading
this would ignore the basic concepts mentioned therein. Mind you, this is no attempt to convince anybody to alter their wave counts. That will
never work and frankly I am least concerned. Maybe, this is just a subtle attempt to coax the non-believing into believing, the partly informed
to well-informed… maybe I might stimulate the learning buds of some of the readers. I would consider all this effort worthwhile if that
happens ☺

Humbly,
Doc AMAR

Call : 98206 94406 / 022 – 3095 3373 / 022 – 2568 2458

Yahoo Messenger ID : tnmcnair

P.S. : Bottomline…. Any theory is only as good as its practitioners.