Market took a nasty dive on the last day of the week and currently sitting right in the support area. It should not be a surprise to readers of this blog as we got enough time to exit the markets. Where are we headed from here?
As expected, market is below MA(100) & MA(200), also MA(100) has crossed over MA(200) suggesting possible change in trend. McClellan Index continues to descent at faster rate as well as remains below EMA(59) & MA(100) which means more and more stocks are declining.
Ugly drop on Friday is visible on the daily Nifty chart below. The green shaded area displays the support zone and breakdown below this area will confirm possible start of bear trend.
Weekly chart makes it clear that if the support is broken (shown by dotted line) then it could be a possible start of a BEAR market. Can you spot the topping pattern!!!
Overall, market appears to be starting a BEAR trend. However, it will be volatile before a clear trend is established and hence we should avoid equity funds for now. The nasty drop on Friday was market's way of showing disagreement to recent RBI policies (to stabilize rupee and put more restrictions on movement of capital). Unfortunately, it's not working and we shall see further damage in coming weeks/months.
What does it mean for our Investments?
Market experiencing change in character, beware of further downside ahead...
What does it mean for our Investments?
- Mutual Funds - We got enough warnings to exit market and by now should have exited equity funds and if you haven't done so then its time to re-think your strategy. Also you had enough time to research debt/bond funds (as explained here) and now would be ideal time to act on it.
- Stocks/ETFs - When market is not doing well, individual stocks have hard time too hence it might be in our best interest to stay in cash or have a strict STOP LIMIT in place as well as take partial gains.
Market experiencing change in character, beware of further downside ahead...