In my last update on the SENSEX - "Kimchi Curry, anyone?" - we were at a cross-roads. Along with its maternal twin, the Seoul KOSPI, the index looked vulnerable for a correction. Instead, the Sensex took off to test all-time highs, with the Korean brother not far behind. The test failed & a sharp correction ensued. Price is just about to reach a significant trendline around 18,800 (as highlighted in the chart), with promise of a short-term bounce at least. Upside capped by congestion at 19,800.


Wave Count & Supports

In the longer-term, it is possible that we have finished 5-waves up since 2009, as illustrated on the chart above. If so, we are potentially looking at a bigger & longer correction here. Possible fibonacci retracement levels - 23.6% & 38.2% - are roughly at 18000, and 15600 respectively. They are also strong historical support levels and thus great buying opportunities!

Alternative Bullish Count: Waves 3 & 4 could be nested i & ii waves in an extended wave 3. In this case, we may not see 18000, and the SENSEX may continue higher to all-time new highs from here, Jakarta style!

Sensex, Scandals & Socionomics

According to the emerging field of socionomics, stock market prices are the result of the social mood  of the population in question. During periods of negative social moods (bear markets), some of the biggest scandals & frauds are unearthed. There are countless examples in history, with the most recent high profile case of 'Bernie' Maddoff.

"India has been rocked this year by a series of corruption scandals that have embarrassed the ruling Congress party, rattled markets and delayed reform bills as the opposition stalls parliament.  "... Read more. All during the recent attempt of the Sensex to get out of the bear market slump, and picking up steam during the recent declines. Feel free to research & point out any other examples in other parts of the world. You will be suprised how predictable these outbreaks can be.

All the best!