In our recent blog post, we mentioned that market may be range bound for sometime before making its next BIG move. We also mentioned that this range will be BIG (5400-6200) which in turn will frustrate many people. But with that said, we also believe that market is in topping formation and the path of least resistance is to the downside. What to expect in near term?
As of now you are probably aware as to why we believe that market is in topping pattern (please read last few blog post for detailed explanation). From below chart, it is apparent that Nifty shall possibly face resistance near MA(100) & MA(200) line. Also McClellan Index line continues to drop further suggesting more stocks are declining than advancing.
Very abrupt and volatile turn around is visible in the daily Nifty chart below, but NIfty faces lot of resistance on its way up. After initial attempt of further gain and consolidation, we might see another leg down to 5450-5500 area.
On weekly Nifty chart, it appears as if Nifty found a support and making a bounce attempt. However, further gains will not be easy.
As of now, Market is giving mixed signals and a clear direction is NOT set. Usually this scenario is typical and happens during long term trend changes (look at end of 2010 and beginning of 2012). It is like a tug-of-war between bulls and bears, takes months to disclose who is the winner and it is always after the facts that we realize where market is headed. Hence there is NO guaranteed way to figure this out and that's why we always talk about "probability" or "chances" of occurrence. For now the probability of market entering bear phase is very high.
What does it mean for our Investments?
Market remains volatile and in correction for now...
What does it mean for our Investments?
- Mutual Funds - You should have exited market when we got our SELL signal but if you are still invested then take this bounce opportunity to exit the market. The opportunity might be months away and may NOT make it to these levels. You can park your money into liquid Funds or invest in debt/bond funds.
- Stocks - Its wise to stay out of this market until we get clear direction. Existing positions should be protected by having strict STOP LIMIT in place. New positions should not be opened unless the pattern is very convincing and always have a STOP LIMIT.
Market remains volatile and in correction for now...