Is it a Confusion Or Conclusion on D-Street?? We say it isn’t both!!

As the euphoria about the reforms unleashing on the one side and anxiety about the stability of the government after TMC pulled out support lingering on the other side the markets are flush with liquidity injected due the QE3 by the US federal reserve and making higher highs and higher lows showing the sign of the bullishness. Is it really a bullish sentiment playing out the mood or is it something else lets take stock of it as below.

As you can see from the below diagram the markets have been drawing down from the top it made on Nov 2010 in a ZigZag fashion making Wave (A), Wave (B) and Wave (C). Now after it made bottom with Wave (C) it has pulled back from there to make a high of 5630 and from there started correcting again upto 4770. 

Now the question here is that, 

Is the move from bottom of Wave (C) upto 5630 is Wave 1 and following correction upto 4770 is Wave 2 and now the current upside which is nothing but a leading diagonal formation (as shown in the fig) could be a first subwave of the Larger Wave 3?

Or

Is it a upward correction of move from Nov top to upto 4531 in which the up move from 4531 to upto 5630 could be a Wave A and the following correction upto 4770 could be Wave B and then now the upward move which is a diagonal can be a ending diagonal of Wave C?

As traders what we have to look at it as in any case the diagonal movement either its sub wave 1 of Larger Wave 3 or the Wave C of upward correction, is near its ending as per Elliott wave rules. The maximum upside can be expected upto 5800 before the correction is expeted to levels near to 5450-5420

Another interesting fact is that if any day the nifty closes above 5630, it can move upto 6060 in the short to medium term. But this move can come only after the correction that we have predicted in the previous Para. 

 So if nifty closes above 5630 any day then the market for short term becomes buy on dips for an upside up to 6060. Or if it doesn’t close above 5630 and corrects from there we have to wait for the 5450-5420 levels to break down to go short in the nifty.

In Both of the above scenarios traders have to wait with patience to get the correct entry either on the long side or the short side.