In last two months, market managed to move from making HIGHs to breaking strong support. None of this should come as a surprise as we knew this long before and were prepared for it. What shall we expect in near term?
Not much has changed in below chart, as expected market continues to move down and MA(100) has crossed MA(200) suggesting change of trend. McClellan index also continues to move down. History often repeats itself, although NOT in same footsteps BUT the end result is always similar which we can conclude from areas shown by #1 & #2. #3 shall form in coming months ahead.
As we can see from below chart, Nifty is bumping against resistance zone (shown by RED shaded area), breaking the resistance zone will not be easy.
On weekly chart, we can see probable support areas (shown by dotted lines).
It should not be a surprise if market tries to break through the resistance zone, however it will not be a easy task. Most likely market may grind near current level for a week or so before continuing its downward movement. We do not believe that market can gather enough strength to break through the resistance area and stay above it. Also lets not forget global scenarios such as possible US attack on Syria, US debt ceiling debacle in September, US FED QE3 tapering decision, etc. Overall, it appears that path of least resistance for markets is to the downside.
What does it mean for our Investments?
Market appears to be entering BEAR trend, stay cautious...
What does it mean for our Investments?
- Mutual Funds - Are you out of equity funds yet!!! If NOT then time to rethink your strategy and act fast as you will NOT get any more warnings. If you are already out of market and invested in debt/bond funds then do keep a watch on them as current economic conditions appears to drag everything down including bond funds. So wait and watch if already invested in debt funds. The best place to park your money would be liquid funds or FD or remain in cash. You may also want to take a look at commodity funds especially Gold/Silver ETFs or Funds which track actual commodity and NOT derivatives of that commodity.
- Stocks - Better to stay on sidelines, if you are invested then take partial gains and have strict STOP LIMIT in place.
Market appears to be entering BEAR trend, stay cautious...