Wednesday, November 19, 2008

Choppy Market with down bias

The world markets are volatile, directionless, confusing to traders. Yesterday, the Dow was trading minus 150, then suddenly, a last hour rally saw it move up by 300 points. What is such market movement telling us ? Volatility inside a bear market is NOT bullish. The message may well be: there is more downside.

Why ? Because a bull market starts when the markets literally go to sleep. Volatility falls dramatically, the daily, weekly, monthly ranges contract. People forget that the stock market exists. An increase in volatility, as we are witnessing now, is giving quite the opposite message.

The Nifty closes near to the 2525 close made in October. Is this a test of the lows ? It may well be, although the momentum suggests that this is a bear market rather than a friendly 'test'. Any rally in the Nifty will face resistance at 2900. If and when the Nifty closes above 2900, the next resistance is at 3200. A new bull market should start if the Nifty were to close above 3200. This seems like a tall claim, as of now.

Inside such a strong down move, the wise trade is to go with the flow, which is down. Any up move will be corrective in nature, and, corrections cannot be easily traded.

A close below 2525 will take the Nifty into new closing lows for this bear market. That is a sign of more downside. It is possible to assume that the Nify may eventually touch 2000, or even go lower. There is no rush to buy. Wait patiently.


tushar said...

Stocks are becoming oversold still no good upside comes for shorting them again.

I mean though the trend is down how can I short if stochastic of most of the stock is below 20.

I mean it does not allow. These are really wild moves downsides.

It sounds childesh if we short after so many down days. Still those children out there are earning.

I think this is not a correction this is a depression.

What's ur valuable view sir?

tushar said...

Sir I am asking shouldn't we have a rally before testing 2000 or october lows or straight away we get a new low?

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