Markets fluctuate between scepticism, maturity and euphoria and while all of these are terms referring to sentiments, people complicate matters by assigning fundamental ‘reasons’ or ‘explanations’ to each phase. And just as everywhere else in life, people overrate the importance of the various factors that they consider to be reasons or explanations.The main thing to understand is that, at the end of the day, it is still the perception of such reasons and explanations by all the others that are responsible to bring these elements to the common man, like the Press, the TV channels, the official digital media, the official spokespersons of agencies, etc.By now, to a man (almost) everyone is ready for a rally. It seemed like we got one when the markets hit the skids in end Jan and indeed, since everyone was looking for it, the market obliged as the main player, the FIIs, briskly covered their shorts for the next set of days. So, everything coincided here: price (22,800), pattern (supports hit), time (27 Jan), sentiment (“it’s all over”), trades (FII short cover), momentum (bottom fishing, oversold), etc.We had more of the same but the impact was not quite the same. The next set of turn dates were in Feb (11/18th) and while the price levels managed to hold at 22,800, the time window did not produce a pattern. Also, absent a good signal, the buyers didn’t step forward at all. This led, finally, to a weekly setup where some attempt to build a bottom over 7-8 sessions seems to have finally been surrendered.Since the short term is sideways but the larger time frame is down, it is time to see a Gann analysis picture for the longer term.I already wrote in the last week letter that an important price and time element is at hand and had written thus: ‘My bull case ahead is caveated on the Jan lows not being broken. If that happens then we will have a deeper cut in price and that is also going to take a lot more time to form a bottom--perhaps that may travel all the way to mid-year and will probably inflict a lot more pain. So, we are near a very big inflection point right now.’It was based on the Chart 1 that I have attached above which is a Gann angle and Price cycle chart that has been constructed from calculated slopes and time ranges.Note how the slopes hit the highs and caught subsequent swing points and how the vertical lines caught major swing points of directional change.In the week ended, we see that the prices are breaking a slope line as well as a level line and that portends a further fall. The only way to avoid this is for the market to quickly regain the broken levels within this week itself. So, that is one of the things to watch for during this week.The chart has vertical lines denoting the big time-cycles and accordingly we see that the next big swing turn is to be expected around the 8th of April. The next slope and level would be in the range of 22,100 area. I had discussed in the previous week letter too about the likelihood of prices falling to that zone range.If this is not to happen, then the NF must recover above 23,200-250 zone. In the last week letter too I had referred to this zone as being important. Here is what I had written, “That makes 23,250 the first of the levels that bulls need to attempt to recover above. Bears just need to keep them from moving past 23,100 area where pitchfork resistance is also visible. The median line of the pitchfork shows support existing along till the previous swing lows of Jan 27 can still hold. So, if by 18th Feb the median line breaks and is not swiftly recovered, then the bears have the vote.”The fact that the bulls were unable to regain the 23,250 levels when it was near by and now have shed ground by the end of the week to the lower base of 22,800 shows that the bears continue to dominate and are possibly taking more control of the market.Attention has been grabbed by the sharp fall in small-cap stocks and because that is causing considerable pain for investors, the slow and steady erosion in the index level is passing unnoticed. There is a continued chorus for a rally because a) that is what we all want b) ek toh rally banti hain na? c) stocks are cheap, relative to highs reached earlier and d) long term story is intact.Now note that each of the above a,b,c,d ‘reasons’ are just hopes expressed in different ways and not one of them is based on any evidence. Point d may have some validity but Chart 1 just showed the vulnerability of that evidence is being exposed here.In the market we should not live in denial. FIIs are still selling. One of the reasons is that their backyard is now attractive (yields are high enough) but one of the real reasons may also be this table. See Chart 2.Market Rout: Smallcaps Hammered, Nifty At Inflection PointThe biggest issue over the last year or two has been that prices have surged while the profit growth simply couldn’t keep up. Every next quarter we hope but then for 3-4 quarters now, those hopes have been getting dashed. Alongside, the currency has been tanking too. FIIs are here to make money, guys. When companies don’t oblige with profit growth and country doesn’t oblige with a steady currency and to make it worse, the country also slaps a capital gains tax on them, what can we expect them to do except exit the country?Now, I doubt if the cap gains on them will be reversed and it is also doubtful whether the falling INR can be quickly reined in. That leaves you with corporate earnings to improve. That too is going to take time. So, what else is left? Only for valuations to peel back. The largecaps are at around 19x now, which is deemed by many as being fair, though not cheap. The midcaps (at 35x) and smallcaps (at 27x) are still considered not yet even fair value, it is reckoned that there may be continued pain. At least, this is the consensus of the Street for now.Chart 3 is NseMidSmall400 index. I am trying to track the last leg of the fall since the September 2024 high. I can see good Elliot setups all through and I have marked a modified Fibonacci measure that has caught the recent low.Top 10 Most-Valued Firms Lose Rs 30,088 Crore In Market CapUsing that and the wave structure I reckon there should be one leg of rally and another of decline still in balance. Extent wise, we may not see beyond the low at 16,500 area on this index but what I have marked on the chart is the minimal time extension till Mar 10-12. If the decline is more gradual, then we could see a time extension for another month more, say till Apr 8-10 too.This suggests that the expected deterioration to find value in small and big may be among the non-index stocks (largely) and could also turn out to be a slow and gradual affair. This can be good news for investors-for, some good names may have bottomed already while others can be slowly accumulated. What it will require is research into finding the right set of stocks. For that, a combination of technicals (to find those where a trend turn is already occurring) and fundamentals (where quality can be ascertained) is needed.So, I leave you this week with the study and view on the bigger picture rather than the happenings of the recent week. At big turn points, it is essential to have a drone-view rather than a Street view.Stock Market Highlights: Nifty, Sensex Extend Losses To Second Week; M&M, ICICI Bank Top Draggers. Read more on Opinion by NDTV Profit.