Market is experiencing lot of volatility, one week it goes UP and the next week it goes DOWN. In the process, it is establishing wide range. Essentially market has NOT gone anywhere from beginning of this year till date. What should we conclude from all this? CONFUSION CONFUSION...
Take a look at below chart, what do we see?
- Market is back above MA(100)
- MA(100) appears to be almost crossing MA(200) and most importantly is sloping downwards
- McClellan Summation Index continues to drop further
Market was able to break above MA(50) without much fight and now appears to be headed to challenge previous HIGHS. One thing is very clear from below chart, from beginning of February of this year, its been a roller coaster ride and too much volatility. Higher the volatility makes it that much difficult to arrive at a probable outcome.
Not much has changed on weekly chart and as expected we are seeing market moving in a very wide range established during past couple of months. Path of resistance is shown by shaded area which will not be easy to break free, however if at all market is successful in breaking it then it might set a stage for massive rally for coming months/years (appears to be very unlikely given the current state of economy and political drama).
What does it mean for our investments?
Market not out of woods and hence be cautious...
- Mutual Funds - If still invested in equity funds then enjoy the bounce but be prepared to exit as soon as market drops below MA(100). If already out of market and in debt funds then nothing to worry, stay put as market is very volatile and no need to rush into any decision. If NOT sure what to do and not invested in any funds yet then you may want to park your capital in liquid funds until we get clear direction from the market.
- Stocks - Take partial gains on open positions and have strict STOP LIMIT or trailing STOP on remaining position. Entering new positions might be risky unless the pattern is very convincing, however do not forget to have STOP LIMIT in place. In volatile times, its better to remain in cash.
Market not out of woods and hence be cautious...