- 2013 - McClellan Index appears to be moving higher and is above EMA(59) & MA(100), while Nifty is already above MA(100) & MA(200) BUT MA(200) continues to remain above MA(100). Although market is in the resistance zone, it can potentially manage to break through but does it mean start of NEW BULL!!!
- 2004-2005 - Similar scenario occurred, market continued to move higher through resistance BUT before starting a massive rally in 2005, it spent almost 6 months near TOP of the resistance. It broke through the resistance and then came back to test the support before starting the massive rally. During this process MA(100) got a chance to move above MA(200) which is shown in the dotted box below.
- Market might fail again and rejected in resistance zone, however will it break down significantly or will it be kept in a range is something we will need to watch
- Market might break through the resistance and make ALL TIME HIGH, but no need to hurry. A breakout to NEW HIGH in itself DOES NOT confirm start of a next rally. It is highly probable that market will come down and test the support (earlier resistance becomes support now). That will be ideal time to get in the equity market
What does it mean for our Investments?
- Mutual Funds - If invested in equity funds then stay put but be cautious. If in cash or liquid funds or CDs then stay put, market is too volatile to take any risk at this stage.
- Stocks - Only invest in solid patterns but DO NOT forget to have STOP LIMIT in place. We added few more candidates to our watch list here.
Market showing some strength in resistance zone, but not out of the woods...