Market came very close to our initial target area of 7200, let's just say we got lucky, eh! OR was it pure technique? By now, you should be able to understand, how we were able to forecast this move months ahead of time. Now comes the fun part, how to know when bottom is in!!! BUT wait until then what should we do? Let's prepare ourselves...
Not much has changed in below chart:
- Nifty remains well below MA(100) while MA(100) continues to trend downwards
- McClellan Summation Index is above EMA(59) but can it sustain the move!!!
After breaking support near 7500 area, market drifted down to 7200 area and now appears to attempt a bounce. However, it will need a strong move to overcome resistance at 7500 (support turned into resistance now).
Support at 7200 area is very much visible in Weekly chart below. It shall not be a surprise if market makes a strong bounce attempt and comes close to 7600-7700 area, however sustaining it will not be easy. No clear signs of divergence are visible as of now with RSI and MACD. PPO might start developing divergence going forward.
Observe below chart, Can we infer any critical information?
Below is a long term chart of Nifty (top chart) and McClellan Summation Index (bottom chart) providing some valuable clues:
Below is a long term chart of Nifty (top chart) and McClellan Summation Index (bottom chart) providing some valuable clues:
- Watch the oval shaded areas where McClellan Index (bottom chart) appears to make troughs or reach lowest point
- Watch corresponding vertical dotted line as it intersects Nifty (top chart)
Inference:
We conclude that market is firmly in bearish territory and we might see a bounce attempt in coming days as market appears to be oversold. However, we do not believe that this market has bottomed yet hence be vigilant and DO NOT get sucked into bear rallies. Missing initial rally is perfectly fine, but entering the market after confirmation is wise.
What does it mean for our Investments for now?
Market remains firmly bearish, stay away.
- After every major bottom in McClellan Index, market appears to make strong BULL run
- Market immediately moves above MA(100) which confirms the major low in McClellan Index
- Every BULL run appears to be sustained for longer duration of several months to years
We conclude that market is firmly in bearish territory and we might see a bounce attempt in coming days as market appears to be oversold. However, we do not believe that this market has bottomed yet hence be vigilant and DO NOT get sucked into bear rallies. Missing initial rally is perfectly fine, but entering the market after confirmation is wise.
What does it mean for our Investments for now?
- Mutual Funds - If still invested in equities then time to hold onto this roller coaster ride, exiting now will be very expensive and painful. No need to rush to start SIP unless we get positive trend reversal sign. If in cash/ FDs/ liquid funds then it is wise to stay on sidelines.
- Stocks - ONLY invest in strong patterns with good earnings guidance and DO NOT forget to have STOP LIMIT on open positions. When market is in correction, it will drag everything down with it. Check out our trade size calculator to manage your risk along with potential buy candidates watch list.
Market remains firmly bearish, stay away.