Long Wait for the Morning

So much for the rally! After a few days of relative calm, suddenly, the Asian markets got the jitters. This led to steep declines in the Nikkei, then to the Asian Contagion, finally to new lows in India.
The bear market is alive and kicking. We expected that there will be some kind of a relief rally. There was a small rally, but it was just a couple of days.
The Nifty fell again, by 170 points. This is a lot since the Nifty has already halved itself. Unfortunately, it does appear that things will get worse before they get better.
The positive divergence visible on the daily chart has not been cancelled yet. But momentum is far more powerful than divergence. And, momentum is clearly on the downside.

Weekly Nifty

The RSI on the weekly Nifty is currently at 22.5 This is the lowest since 2002. In the period 2001 – 2002 the RSI fell below 25. This was a sign of weakness. It took the market two years of sideways movement before the new bull market started.
It is difficult to say how much time this will take. But, the bear market is not going to end quickly, that much seems evident.

Will Fibonacci support hold ?

After 3800 broke down, I have suggested that there is no support in the Nifty till 2000. This does not mean that the Nifty will touch 2000, it simply suggests that technical points are not available to stop this decline. the market can stop whenever it wants.

A question is: The 61% Fibonacci retracement comes in at 2900. Can the Nifty stop its decline at this level ?

The answer is: Fib support is relevant only if prices stop falling, momentum reverses to favor an upside. Until this happens, Fib support is only imaginary. The difference between visible support on charts (like 2000) and Fib support is : visible support are levels that the index has seen, while Fib support exists only in the chartist’s imagination.