Twice before stochastic divergence coincided with NIFTY halting its decline. The chart below shows how close is stochastic currently to those levels. NIFTY is also presenting a brief divergence as while 2nd Nov. lows on NIFTY have been broken and NIFTY has made a substantial new low today, stochastic have failed to materially make a new low. NIFTY is also closing below the trend line created from 8 Sept lows, though not on very strong volumes. In this context there is still potential for the breakout being a false breakout.
This selling is largely anticipatory in context of outcome of Bihar polls. The social media chatter on how the Mahagathbandhan would likely form the next government in Bihar, might be validated or nullified by the evening’s exit polls. Tomorrow the market is likely to price in the exit poll results. If markets continue their fall for next couple days (specially in context of the trendline break and stochastic lows) we are definitely in for further downside once final results are out on 8th of November,re-test of levels of 7691 and 7539 would become distinct possibility. 7539 is also the high of the “Modi Era” support range (we would elaborate more on this support range if prices indeed take a turn for the worse).