RBI Meet on 20th September - What To Expect - Desi QE Episode 1

So Uncle Ben decided to leave the QE untouched for now. Not the unexpected as I had warned in my outlook earlier this month i.e. US will continue with QE for as long as possible - period. Whilst many may argue for / against etc etc - markets have their own ways to make out what they want.

In a knee-jerk reaction, we may have global indices, commodities going on a roll leaving bears puzzled. As far as Nifty is concerned, the technicals remain unchanged as far as fundamentals are concerned, it is a different story all together.

Desi QE specialist, Raghuram Rajan holds his 1st RBI conference on 20th September and let us analyze what to expect. His debut was celebrated in style and his bold initiatives cheered. Inflation has shot up big time though currency stabilized by about 350 basis points. Now comes the Catch 22 situation from an Indian perspective.

Whilst the growth story demands that rates be cut, the latest developments make that a difficult option to take. Let us not forget that this meet is not just about interest rate decisions and CRR decisions but also about the guidance for the RBI. With new banking licenses set to be doled out and forex risks to be mitigated, the mainstream press and punters will be waiting with baited breath to take on senor Raghuram

Interest Rates: A rate cut is highly unlikely given the inflationary outlook and global liquidity. Thanks to US Fed, for now that part can wait

CRR: Expect a 25 basis points to 50 basis points cut in CRR to indirectly inject some liquidity

Currency Swaps: It will be interesting to see what is the guidance on this front. So far RBI has only announced swap measures with regards to USD-INR flows for the banks and OMCs. Luckily, Japan voluntarily came in and tripled the INR-JPY swap window to the tune of USD 50 billion equivalent this month (Point to note: Japan took lead in this step and not India!)

To save the rupee along with other EM currencies, it is very critical to have more partners on board for similar currency swap windows. With the recently concluded G-20 summit and BRICS discussion, it is very critical that at least with major trade partners like China, Thailand, Malaysia, Indonesia, South Africa, Russia etc to have INR-XYZ currency swaps that will be win-win situations on both sides. Unfortunately, it is highly unlikely as our central bankers seem to be happy with the fact that Iran accepts INR payments.

Moreover, politicians' vested interests lie in as many dollar transactions as possible!

Banking Licenses: This is one of the most absurd decisions seen ever. Rather than recapitalizing existing banks and moving towards consolidation (that will reduce a lot of fixed expenses and bring economies of scale) new banking licenses seem to be the flavor of the season.

Forward Guidance: Will be hawkish short-term and dovish long-term

As of now, the markets seem to have priced in a rate cut, CRR cut of about 50 bps. No QE tapering for now will keep rupee stable. So the upside on BankNifty maybe capped around the 10800-11000 mark.

3 major events were expected to rock the markets this week
1. US Fed Meeting: Uncle Ben gave markets reasons to celebrate
2. RBI Meet: Raghuram maybe hawkish and still get away with it for now
3. German Elections: Time will tell and as I have been repeatedly saying, this will be a potential game changer for global markets.

An interesting pair trade prior to RBI meet
Build a BankNifty Straddle with Oct 11200 Call and Oct 10200 Put with a combined cost of entry of about 250 per lot. Target Exit Points are 11000 or 10400 where in the pair will almost double. Keep a Stop Loss of 125 on combined value of the put and call.

Premium Invested: Apprx 250 x 25 = 6250
Maximum Loss: 125 x 25 = 3125
Potential Gain: 250 x 25 = 6250

Enjoy the new Desi QE version Episode 1

Olympics 2020 in Tokyo - What a Shame

So we had 3 final contenders for the 2020 Olympics i.e. Turkey, Japan n Spain. End result was that Japan was chosen to be host. The decision to leave out Turkey is understandable - it is still an emerging nation and it won't be able to gear up to infrastructure requirements over the next 5 to 7 years - fair point.

What is incredible is that Japan was chosen over Spain and that is quite a disaster. There seems to be a marked pattern in the way venues are being chosen for such big ticket events. UK was chosen to host the previous round [because BoE keeps printing money] and now Japan [because BoJ has gotten aggressive with Abenomics] Even during the UK Olympics, one of the PIIGS would have been a good choice - it would help turn around at least 1 economy. However, UK prevailed. Lots of infrastructure developments done for the event and a few weeks later, most of these developments are biting the dust!

First of all, we need to understand the demographics and situation between Spain and Japan; Japan too is an economy struggling with stagflation but a large chunk of Japanese are senior citizens. Some of them are in such bad shape that they have to live in the outskirts of Tokyo in shady and dingy dormitories because there is both space crunch and high real estate cost in Tokyo. Japanese corporations have such high number of headcounts who are being stuffed into 'boring rooms' so that they eventually resign and leave.

On the other hand, Spain is a relatively younger economy with almost 25% of youth under the age of 25 unemployed. Spanish infrastructure is fantastic and they would rise to the occassion. The real estate prices in Spain have rationalized substantially and thus, this one single move of Spain hosting 2020 Olympics would have boosted Spanish economy. It would help Spain at least partially turn around the economy with minimal financial aid from ECB. A golden opportunity lost from Spain and Europe's perspective.

On the other hand, the highly inflated real estate prices in Japan will further fuel an asset bubble and most of the Japanese tax payers will further reel under pressure. BoJ will have to further print money to set the house in order and that IMHO is a criminal waste of economic resources.

As I said earlier, it is remarkably co-incidental that countries that are aggressively printing money are the ones that are getting access to such big ticket events [Brazil and Qatar also have big ticket events coming up. The property bubble in Brazil is already quite hot and once the FIFA and Olympics are done, they will be in bad shape as well; Qatar is on a set path to become the next Dubai but they have oil to bail them out]

To summarize, the world leaders are not in favour of economic prosperity of their citizens. All that they want to do is suck out the blood of tax payers and keep the rich where they are and keep the poor where they are. Japan Olympics 2020 will be short-term gain and long-term pain. Well done IOC!

Outlook For September 2013 (Revised Counts)

Very volatile month indeed; as mentioned earlier, the current correction is similar to the one we witnessed in Nov'10 to Dec'11 period. We all know how choppy the markets have been in recent times on intra-day basis; the same was the case in the earlier period as well. Now, it is even more pronounced by virtue of the fact that institutional traders are allowed algorithmic trading. Whilst such moves create lot of fluctuations in intra-day basis, on EOD/EOW/EOM basis, prices do rationalize.

We know where we are - we want to know where we are headed - but let us review Nifty / BankNifty Daily/Weekly Charts first

As I have been harping that current correction is similar to Nov'10 to Dec'11 moves; I had also mentioned in http://niftyparadox.blogspot.in/2013/08/why-many-ew-counts-go-wrong-in-india.html this post about the broad moves in 2010-11 period

[Thanks to a couple of queries on the blog and Twitter, I realized that the previous count is INVALID as it tantamounts to an Expanded Flat. The current correction is a Double Zig-Zag similar to the Nov'10 to Dec'11 correction]. And since this is a larger degree count, it must be rectified asap as erring on this has serious ramifications]

Now we have done the following moves (Revised)

Preferred Count
A: 6225-5566-6125-5477-5477-5118
B: 5118-5*** [Can go upto 5944]
C: Pending

Preferred Alt1
A: 6225-5566-6125-5477
B: 5477-6125-5532-6093
C: 6093-5118-In play

The preferred count suggests that 2 large moves are pending; one on the upside and then a very deep downside correction. [2 consecutive closes below 5280 can confirm this]

The alternate count suggests that the pending upside move will be shallow [5740-5810] and the ensuing downside will also be shallow [4911-5032] [shallow relative to 5118]

The last alternative suggests that the correction is completely done with and the next up move has begun [2 consecutive closes above 6280 can confirm this]

My personal probability assignments are as follows
Preferred Count: 60%
Preferred Alt1: 35%
Alternate: 5%

Regardless of which one comes true, one point is very clear; index linked ETFs, and index heavy weights like LT, SBIN, Axis Bank, ICICI Bank, ITC are moving towards accumulation bands. The last leg of correction will perhaps take them down to about 15% from recent lows. The maximum damage will now come from the IT pack which is excessively valued. Just a 5% to 10% correction there is enough to generate 20% damage to Nifty.

For Nifty trades, the following timeframe wise levels are intact

Daily - Bullish for 2nd Sep '13 with EOD > 5445. Only a close below 5348 will resume downtrend
Weekly - Bearish and only EOW>5740 will bring bullishness
Monthly - Bearish and only EOM>5803 will bring bullishness

How should one approach the markets from here
On the investment front, dips should be bought into with a 2-3 year horizon. I have been updating my picks when prices come to accumulation point. As usual, I prefer to keep maximum exposure to the index itself than individual stocks. With a 2-3 year time horizon and target gains of 25% PA, Im willing to take a 10% to 15% hit in my equities portfolio.

So personally Im Long Equities and Short FnO as on date.

On the trading front, the big picture has been presented above and I keep posting on Twitter regularly regarding key levels. Personally, Im bearish till EOD/EOW<5740 but will shift gears if that condition goes through. Im not playing for the upside but using current rallies to build shorts via Oct Puts. I will be exiting all my Puts once EOD/EOW>5740 happens

For secure bull markets in India, we need Rollar to be at sub-48.25 levels. Whilst the current levels of 66-68 are extremely disturbing, there is empirical evidence to suggest that history is repeating itself. If you pull out the data for the last 25-30 years, pre-election years have seen rupee crashing by as much as 20%-25% and then rationalizing after election results. I think the same will happen yet again. There is a lot of sectoral churning that is taking place which usually is an indication of bear market rallies.

Critical Dates in Sep: 22nd Sep '13 i.e. Fall Equinox The 3 days prior to this date and subsequent to this date will bring large swings and alert traders stand to gain a lot here. This date also coincides with the elections in Germany that will be the real game changer. The majority is looking at US Fed tapering and the war on Syria - my personal view is that when all are looking at the most obvious points and views start converging at those points, they don't turn out to be game changers. The shockers will always come from the most unexpected places.

Whatever US Fed does, it does to prop up the USD or specifically demand and circulation of dollars. Whether its QE, whether its war or an internal recession - doesn't matter. With crude prices knocking 110/120 to the barrel, US has achieved what it wanted to achieve. QE will keep going until people dump the dollar - period.

Other Updates:
Gold and Silver have in all likelihood found bottoms in Rupee terms. In dollar terms too, that may have already happened. Boiling crude is a serious issue and IMHO, one more leg of fall is pending.

Not sure whether Dow has topped out but it is approaching some critical points and a 10%-15% correction is not ruled out.

FTSE, DAX, Stoxx 50 have all got a good 20% correction pending

As Keynes kept saying, 'Markets are irrational to the extent you are solvent' In real life, it simply means that markets will keep doing their own things and we need to act when our target buying/selling points come through. It is perfectly okay to have a view but when prices confirm otherwise, we have to junk our personal views and follow what the ticker is showing. The worst thing a trader/investor can do is 'look for what suits his/her view'; a sure shot recipe for disaster.

Happy Investing and Trading; last week of September should be exciting and Im eagerly looking forward to it. We have a lot of festivities lined up in 2nd half of 2013 and I hope all of you enjoy the same.

Buy Zones For Longer Term Investments - Part 3

Doomsday pundits will keep spreading the word of panic in markets as institutions are selling capital market asets and taking 'flight to safety' towards dollars; the main commentary from most 'experts' on channels was book out and hold on to cash; the very people who found stocks and valuations 'attractive' at 6000 levels do not see value now and would like retail investors to hold on to cash.

Fact is that although some more corrections are expected in Nifty / BankNifty levels, some of the stocks are approaching critical buy zones. In my last post I had mentioned Larsen and SBI bands.

Today, I find value buying in 3 scrips coming up

NiftyBees - CMP is 525 and it may slip to 450 levels as well. With a 3 year horizon one can ignore the short-term volatility and accumulate on every 50-60 point fall. The longer term targets are 600+

BankBees - CMP is 885 and it may slip to 750 levels as well. With a 3 year horizon one can ignore the short-term volatility and accumulate on every 50-60 point fall. The longer term targets are 1350+

ITC - A stock in the consumption theme. Bulk of the revenues come from the tobacco business, followed by FMCG. The hotels line may not add too much in the bottom-line. 240-270 is a strong buy zone for longer term contracts of 375+ Dividends are also healthy.

Keep a Stop Loss with 2 consecutive closes below 200 as that will open ITC for 150 where one can re-enter.

If you can live with some short-term losses, the current chaos is providing good entry points. Happy Investing

Some Blue Chip Stocks Approaching Buy Zones - Part 2

As discussed last time as well, here are some updates to the value buying list for longer term investments

1] Larsen [LT]

Accumulation Band: 500-750 [Earlier band of 700-900]

Fundamentally sound company with good dividend yields. Over a 3 year horizon, it is expected to trade around 1250+ levels which is the profit-booking zone. One may start using current dips to buy for longer term investments.

2] SBIN
Yes the counter has some NPA issues as with all PSU banks. The warning that the counter is set to test 1600-1800 bands was given even when it was trading at 2750 levels. In the short-term, it may slip to 1400 also. However, bottom-fishing is difficult. Accumulation band is 1400-1800 levels. Should there be some short-term blips below 1400 also one need not be worried. The dividends and longer term target of 2750-3000 is intact for SBI. One can buy into these dips for a 2-3 year horizon.

These are 2 heavy weight index stocks that bounce back much faster than the index itself when the longer term uptrend returns.

Please note that the current price levels in SBI and LT are almost near 2010/2011 lows when Nifty was at 4500-4800 levels. The consumption theme and IT theme will soon lose flavor when the Rollar returns to normalcy and stretched valuations make themselves unfurl. One can comfortably deploy around 20% of one's investment amount in these 2 stocks in 3 to 4 tranches over the next 2 months.

This is indeed a value buying / discount buying opportunity that does not present itself often IMHO. Happy investing.

Real Game Changer For Global Markets - Germany not US

A very horrible session for Indian bourses on 16th August '13 with almost 6% shaved off BankNifty, almost 800 points off Sensex and 200 points off Nifty. A couple of months ago, I had mentioned that Indian bonds were rallying with a significant reduction of 1% on the coupon rate of 10 Year RBI treasuries. It was a huge positive. I had also mentioned that it is the bond markets that drive other asset classes in any country.

The second part has stayed intact but the first part of this outlook fell flat on its face over the last 3 weeks. With higher interest rates imposed by RBI for overnight funding of banks and the Rollar kissing the 62 mark, Indian bonds are now trading with one of the widest gaps ever in the last 5 years. Whilst the coupon is 7.16%, the current yields in the money markets are over 8.6% and this is far worse than 2012 now. In 2012, the coupon was 8.16% and the highest yield over the counter was about 8.3% and the lowest around 7.8% In such a scenario, FMPs will be very very badly hit. [and they have suffered a lot of damage already]
Yesterday's fall can be largely attributed to the Rollar price and the surge in Indian Bond Yields.

Sentiments are extremely bearish and virtually every media outlet on tv or online is trying to attribute challenges to the US Fed decision of tapering QE. First and foremost, one must remember that tapering does not imply end of QE. All that the US Fed said was that it will review the situation and decide on the quantum of QE from the current USD 85 billion to some other amount. One must understand the key motivation factor for US as a whole - they want to ensure that the demand for dollars keeps surging at any given point of time. US has been following QE for over 5 decades now [since World War 2] i.e. printing money. This will go on forever, to the extend the world recognizes USD as the reserve currency of the globe. Names and forms will keep changing i.e. QE, Operation Twist, War on Weapons of Mass Destruction, Return of Democracy in Middle East etc etc etc - yes you heard it right. Even the so-called wars are nothing but a bid to prop up demand for dollars - period. So most people who will look at the US Fed decision on QE and take trading/investment positions accordingly IMHO will lose big time.

Markets are very well aware of continuous QE from US in all formats and hence in the larger scheme of things, it will be a non-event [there will be knee-jerk reactions in either direction of indices when press statements are released by FOMC]

The real game changer for Global Markets is actually the elections in Germany in 3rd week of September. That is something that nobody in mainstream media wants to talk about and the central bankers / politicians are happy to have it that way. Germany under leadership of Merkel has been bailing out Euro-zone countries for almost 6 years now without much respite. One should not forget that Draghi at ECB is literally powerless without green signal from Merkel to continue LTRO operations.

Merkel keeps saying in media that she is worried about tax payers' money being blown out but that bottom-line is that she is happy to go with the LTRO arrangement for now. Key motivating factor is that contrary to media reports, the fact is that Germany is heavily dependent on exports [both international and intra-Europe] The LTRO operations help German businesses big time. We have come to a stage where the nominal interest rates in Germany [for institutional deposits] is standing at -0.25% This means that to park money with the German central bank, the depositor has to pay interest to the bank!!! [of course the motivation behind this from investors is safety and a potential windfall gain should Germany return to DMs] also Germany's borrowing costs are lowest as a result of this kind of a setup.

Let us start with Merkel's current position and chances; German tax payers i.e. the middle class do not like Merkel too much right now. They feel that Merkel is siphoning off hard earned German tax money to peripheral European countries for simply too long. They are very clear that even billions of Euros as bailouts cannot actually change reality. Trillions and Quadrillions of Euros are needed for a full-fledged normalcy and this state can only be achieved by money printing. They fear the worst in such cases as Germany has gone through a very very hyperinflationary phase in World Wars where wheelbarrows of millions of DMs could barely buy a pack of milk and bread.

From the German business point of view, Merkel is 2nd only to GOD. She bails out nations and then her think tank ensures that most of the bailout money comes back to German corporates by means of tenders, business deals etc. They will offer thumbs up for her to continue at the helm. Until the election verdict is out, a lenient approach by ECB and Germany will continue as it is.

So things are not that hunky dory for the incumbents i.e. CDP in Germany. On the other hand, opponents of Merkel are hard-liners as far as economics is concerned. They are very clear that Germany must stop their version of QE [via bailouts] and restore the DMs. It is short-term pain for a long-term gain. Finland now is almost the defacto number 2 voice for the Euro-zone and Finland has been against bailouts after the 1st tranches were given off to Greece and Portugal.

Even if Merkel comes back, this time to ensure that she [or her party] continues, she will have to harden her stance and reduce bailout amounts. Should anti-incumbency come through, bailouts will be near zero! With the pain in Euro-zone worsening with more and more members joining PIIGS, Germany has approached a cusp moment of this era: Germany created the common Euro and rather than booting out so many members from the common Euro-zone, there is every chance that Germany might find it easier to work on its own exit and leave the PIIGS to decide further course of action.

To summarize, one need not look at US Fed [or BoE, BoJ for that matter] because demand for dollars will keep coming through. Germany is the game changer for global markets and stay tuned to that. Just to put things in perspective, the tactic currently used is similar to the tactics used by Japan during the Pearl Harbor explosion. Send one ship towards the west and let spies keep following that ship [equivalent of focus on US Fed today] send the real bombing ship eastwards to attack Pearl Harbor [what Germany will do] Japan also followed a similar strategy to outsmart Brits in Singapore when they captured Sentosa.

What Japan does as an excellent military strategy, Germany does so in economic wars. Be alert - learn where to focus without letting the media chronicles distracting you. They will always be late in reporting news as breaking news; the prudent and independent person uses his/her own discretion and directs focus to the core - the core for now is Germany

Clock is ticking tick-tock-tick-tock - Euro-zone break-up is inevitable; the only question is October 2013 or October 2016...........................................

Why Many EW Counts Go Wrong in India???

To begin with, I must admit that I am still pretty a novice with EW counts but have seen a lot of charts, labels, counts made with the aid of EW and yet, most often than not, things don't fall in place. Is it the case that the EW Theory is wrong? Many a time, people feel, this may perhaps be true because even Bob Prechter and his team have got a lot of counts wrong since May '11.

As I have kept mentioning earlier this year as well, the real reason why Bob Prechter and team have got counts / trades wrong is because they are 'looking for what they want to see' and 'what they feel'. It is precisely this own bias clouding judgement that has gotten them all over currently. Is this the first time that it has happened to them? No, perhaps around 2005-2006 itself, they had put some illustrative charts on Fannie Mae and Freddie Mac and predicted that they would become penny stocks. Did it happen? Yes it did but just that it took 3 more years to happen.

Coming back to the Indian scenario and why a lot of applied Elliott Wave Analysis goes wrong. Let us go back to the 'fundamental ground rules' laid down by Elliott for scrips that do follow the Elliott Wave patterns [all covered in Chapter 1 and Chapter 2 of the book]

1] Most commonly applicable on Market Indices
2] Applicable to cyclical industrial stocks and stocks that have healthy volumes [When the volumes are being spoken about here, remember that the initial Elliott Wave principles were laid down in 1920s and 1930s. So even on NYSE, the volume implied 'Delivery Volume' as the proportion of day-trading was minimal]
3] The index or the scrip must be able to follow a hierarchical structure of Super Cycle, Major Cycle, Minor Cycle going all the way down to minuette and sub-minuette levels. [Again remember, the smallest time frame available to Elliott at that time was 15 minutes and he chose to keep the least count at hourly basis]

I have seen many attempts at many forums where people are looking at 2 minute / 5 minute charts, looking for divergences etc but that is nothing more than an 'itch' to take a position or 'restlessness' to see a position move in favored direction. Sometimes, labelling at such fine degrees may fall in place but most times it won't. If one wants to have a good count of Nifty / BankNifty, the smallest time-frame used must be 1 hour IMHO

The other principle of selecting the scrip and ensuring that it is suitable for EW Analysis

First of all take the Monthly / Yearly chart of that scrip and see whether there is a hierarchical pattern with a large uptrend / downtrend and then waves / sub-waves within that. If such a pattern is visible on Monthly / Yearly charts ONLY then it should be considered for counts.

For illustrations

Nifty Monthly / Yearly Charts All-Time

The fundamental principles behind EW are

1. Mankind has been made for progress in the grand scheme of things
2. In progress, one moves 5 steps forward and 3 steps backward

So taking these principles into account on the Nifty Monthly Charts [We are still in the nascent stages of what is called 'Grand Super-Cycle]

The 1st Grand Super-Cycle Wave completed as a set of 5 Super-Cycle Waves when Nifty attained 6357 in Jan '08. After that, it has been in a corrective phase that is still on-going. If you feel that this is so time-consuming, I would encourage you to look at the Monthly/Yearly Charts of DJIA. For more than 6 decades, it was struggling in a range of 50-1000. It is the so-called 'Roaring Eighties' [The Baby Boomer Generation in Marketing parlance] that all resistances became history for a brief period of 5 years.

When will the Grand Super-Cycle 3rd Wave start for Nifty in India? Well that is difficult to answer as I don't have a crystal ball with me. However, the affirmation of the same can be confirmed when Nifty takes out 6357 with loads and loads of buying in cash by institutional investors and with significant delivery volumes. Howe high will that be? 1.618 times the 1st wave i.e. towards the 10K or 11K mark on Nifty. When will that happen? 0.618 times the time taken for the 1st wave to get over. It took almost 8 years for the 1st wave to get over. So it will still need a good 5 years after the current corrective phase is done with.

Before I dwell more upon this aspect, let me show you some charts where EW principles are clearly not applicable

DLF Monthly Chart

Is there any resemblance to the multi-year chart of Nifty? Its just headed one way since inception and that is down south i.e. sooner or later this will go to 0. Does this imply progress? I don't think so. So any trade taken on DLF with the help of EW will be a fluke as the scrip does not meet the basic criteria of EW principles.

ITC Monthly Chart

Does this qualify for EW Analysis; indeed yes as the progression is steady; volumes were high when it was trading at sub-25 levels and now it seems to have conquered all visible resistances and is trying to locate the next resistance.

Why these illustrations of DLF and ITC ? Just to drive home the point that scrips like JPAS, HDIL, IVRCL, IFCI, Suzlon etc etc never complied and perhaps will never be able to comply with Elliott Waves' fundamental criteria.

Bottom-line: EW works perfectly well on scrips that in the larger scheme of things obey the principles of 5 steps forward 3 steps backward criteria. If that is not the case, then forget applying EW principles to those scrips as probability of making losses are greater than otherwise [and we trade/invest for profits right???]


The next part that I mention maybe easier to say on hindsight but it is critical because this again corroborates my earlier comments that there are only a few trading sessions in a given year where in big gains can be locked in. One is free to look at the ticker as much as one wants but for long term gains, positions must be very little but those that garner large gains

Nov'10 onwards [13 month correction]
A:  a: 6338-5690; b: 5690-6181; c: 6181-5177
B:  a: 5177-5944; b: 5944-5196; c: 5196-5708
C: a: 5708-4721; b: 4721-5400; c: 5400-4531
[This entire structure completed a larger degree A, by the way after which the rally from 4531 started]

Again, the structure was a double zig-zag with more swing moves within but this is the larger scheme of things. In a 13 month period, these 3 corrective waves and their sub-waves gave a total of 3000 points. Given the fact that depending on time-frames one takes into consideration and stop losses being triggered etc, even if 2/3rd of these moves were captured by a savvy trader, 1 lot would have yielded 2000 points.

Now this is particularly important as the current downward move is pretty much on the same lines as the correction from Nov '10. Should you be alert and wait as a safe trader for the opportune moment to present itself on EOD basis, there are about 6 more legs of 200-300 points minimum [could go as high as 700 points] waiting to be lapped up. Rather than take a position everyday/week, hold on to the margins and once the signals come in go full throttle with 3 to 4 lots via futures and options.

So to end the entire sermon like post on Eid;
EW principles are absolutely valid [provided the conditions specified are used appropriately]
EW principles take into account Fibonacci ratios, time and price factors, supports and resistances as well
The least count time-frame to use EW analysis is 1 hour [60 minutes]
One should not be biased with one's own trading position whilst applying EW Analysis [or for that matter any form of price/technical analysis]
You just need 3 to 4 trading positions in a year to get whoppers and not positions everyday especially in the FnO segment

Yenjoy...................http://www.youtube.com/watch?v=O0mfq-Ojz00