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Everyone is toying with the question. The market seems to have arrived at cross road and most experts are hopelessly divided about the direction where the market will head, and I am not expert at any technical analysis but I too have my opinion 🙂

I recall reading somewhere (do not recall the source, please share if some knows) that historically is is seen that once market corrects it takes 91 days to begin recovery phase.

Nifty Chart January 2008 to April 2008

Around 10-04-2008 Nifty showed first fall and continued, with 2-3 bounce back. Intermediate bounce backs lasted for 2-3 trading days but the trend was downwards. Around 09-04-2008 recovery started which continued for 7 session, then two insignificant days of profit booking and then the trend continued upward. Perhaps, this can be sign of beginning of recovery phase and the market has swing up after showing the bottom. The market was not fettered by any negative news during while making continuous uptrend which is good sign.

If one compares the chart of previous fall of 11-05-2006, which also showed recovery around 09-08-2006 (approximate 91 days) and then the trend was continued.

RSI (Relative Strength Index) of both the charts are strikingly similar going towards 70 , and should remain around that level (in the recovery of August 2006, RSI constantly remained around 70 till first week of December’06).

MACD (Moving Average Convergence/Divergence (MACD) in both the charts are moving above 0 (turning positive) with the positive histogram. After August-2006 correction MACD line remained consistently near 65 till 08-12-06.

Only CMF (Chaikin Money Flow) indicator shows some worrying sign. During May-August’06 recovery, CMF showed consistent accumulation during previous two months (July-Aug’06) of the recovery phase. However presently CMF is not conclusive at all and indicator is withered showing confusion among the market players.

Technical analysis , however, does not consider any external factors and merely base the analysis on the chart patterns. Thus the chart pattern shows bullish sign, but one has to wait for confirmation of bull market.

However, in US according Dow theory, the market has confirmed bullish signal as both the index (Dow Jones and Transportation) have arrived at confirming the bull signals around 18-04-2008 (Read following articles for Dow bullish signal).