Wednesday, November 26, 2008

Market will tell us when it is bottoming out

Sector Rotation may give some ideas on when the Market is bottoming out. While there are no surefire rules, experts suggest that Technology will usually be the first sector to bottom out. Thus, tech stocks may start building a base even as the rest of the market is falling.
As the bottom approaches, we may see relative strength appear in banks & financials. While it still may lose value, it moves from a market laggard to a market leader to give us a sign that things are beginning to change.

Readers may have surmised the essence of this note: Financial and technology sectors should be the areas leading the market out of the bear grip. Relative strength + base building in these two sectors should start giving us warnings on the possible end of the bear market.

A bear market rally on the other hand, may see gains accross the board, with sharp, wild up moves. This could give us some idea that the up move is not the beginning of a bull market.

Not as easy as ABC

Identifying the start of the next bull market is not so simple. The best financial wizards of the world have failed miserably in doing so and protecting the money of millions of people. If they can fail so spectacularly, individual investors can be excused for getting some ideas wrong. The point is to try and be a market follower, not try to teach the market.


Inampudi said...

Thanks Shri sudarshan,every day morning before even i hear udayans comments in bazar morning call, i usually read your blog first to make the days market stratagy,Many times it is accurate but it is very difficult to follow my own stratgy durig the market trading hours.At this time your 10000 hours of practice suggested that how much experience required to become as a trader. Thanking you it is remained me where i am in the endless sea of trading.

tushar said...

Sir this blog is dedicated to you by me.

Hope you will visit.

rajv malik said...

namaskar sudarshan ji,

how do you see investment in gold etf's in these turbulent times ?
will it be appropriate to sell stocks in loss and shift the money to gold ?

warm regards
rajiv malik

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