There is an increased pessimism among the investors across the globe and the mention of 'double-dip' have increased its presence in the media and most traders seem to easily forecast it. I have been quite bearish about the US markets since the end of April 2010, where the Dow made a classic 'evening star' pattern along with the rising trendline.
In the last 4 sessions, S&P500, held on to 1040 very strongly. This had made me recount the wave structure, and I see a possibility of a longer sideways correction unfolding.
The Dow seems to be in a triple flat corrective move, after having completed the 5wave down and is just holding its head above the 10k figure. The index is possibly moving in a rising channel and could do 10800 within a period of 2months.
The S&P 500 is showing a contracting triangle. I have considered the recent bottom of 1040 as the end of the wave - xx, as it has corrected near 76% of the previous up move (wave Y). This opens up a possible up-move on the index upto 1125 - 1130.
What would this signal for the Indian markets? Well, Sensex could head for the key resistance of 18650 in the near term i.e. 5600 on the Nifty. Preferably, one should wait for the Dow to cross above 10300 or 1075 on the S&P500, as a confirmation for the above reading.
