The Nifty was down over 11% from its record highs of 26,277 through yesterday’s lows in what has been a correction that has been greater than the length of every decline the market has experienced since the troughs seen in Jun’22. Today, the market jumped 2.4% – the biggest such move since June 5
th – in a move that could have upside ramifications.
The drop into yesterday’s lows had brought a major support area near 23,100 into focus, where several things were creating a “cluster of significance”. Here’s why this zone is noteworthy:
- Downside follow through on the break of the 200-day average was completely missing
- Rising trendline drawn from the Oct’23 lows was passing through here
- 61.8% Fibonacci retracement of the rally from the election day lows to the record high lay in the vicinity of where we are
- A falling, parallel channel drawn off the Oct 7th lows was offering support at current levels
- The head and shoulders top that was validated with the breakdown near 24,750 on Oct 22nd had a downside objective near 23,100
- The daily Ichimoku cloud border was flat-lining near this area, which means major support
- Decline from the record high-day through yesterday’s low was 37 trading days, close to a square number
- An Ichimoku time window falls between Nov 25th and Nov 29th, with a more significant window sitting in the week of December 5th
Next, how has the Nifty typically done between Nov 25th and Dec 31st over the last 25 years? On average, the market has gone up 80% of the time during this period, with average and median returns of 4.1% and 2.2% in that order. Also, in years of US Presidential elections, the Nifty has risen in 100% of the instances during this time, with mean and median returns of 5.8% and 6.8%, respectively. Please note that seasonality is “typical” or “average” behavior and not that of any one period, which may be different from what has typically happened.
That said, any failure to hold 23,100 will bring 22,500 into play. An immediate upside hurdle remains at 24,000 followed by 24,400-500.
