As expected, market did drop and is very near its MA(200) as anticipated, This should not come as surprise if you are following this blog, we were expecting this for quite some time. What will happen next? Let's understand from charts...
Check out below Monthly Nifty chart, let's make few observations:
- During mega BULL phase market pulls back to MA(12) and then continues its mega trend - This behavior is visible during 2004 - 2008 and now again market has pulled back to MA(12)
- During mega BULL phase StochRSI cannot remain oversold for long time - watch green dotted lines
- MACD cross over needs to happen for bear trend to continue - watch circular shaded areas
- RSI remains above 50 mark and never drops below that level
Daily Nifty chart below shows market is resting on MA(200) which also happens to be support zone. We might get a brief drop below MA(200) to shake out weak hands, however market should be very close to turning around.
BUT WHY? Why can't market drop further or start a bear market?
Bear market do not start just like that, market needs to go through a topping pattern which means we shall get a bounce and it will not be able to breach the recent HIGH followed by series of lower HIGHs.
At this point, charts are NOT signalling any bear market signals and this drop is a basic characteristic of BULL trend.
BUT WHY? Why can't market drop further or start a bear market?
Bear market do not start just like that, market needs to go through a topping pattern which means we shall get a bounce and it will not be able to breach the recent HIGH followed by series of lower HIGHs.
At this point, charts are NOT signalling any bear market signals and this drop is a basic characteristic of BULL trend.
Next two weeks shall reveal more information:
Market remains bullish, stay cautious and alert...
- We expect market to marginally drop below MA(200) and recover quickly back above MA(200)
- Once the low is established then market may spend another week between MA(100) and MA(200) with a good breakout above MA(100), that should be a clean signal to get in the market
- Once market manages to get above MA(100) then we expect it to start rallying and leaving everybody on the station who did not get on the BULL train
- However, if market drops below MA(200) and stays below it for long then it is time to be concerned, but we shall look into it when we get there as charts will reveal more information
Market remains bullish, stay cautious and alert...