Tuesday, July 22, 2008

Sell the News ?

The Indian Markets have seen gains of 12% in just four trading days, with the Nifty closing at 4260 today, up from its close at 3820 4 days ago. The anticipation of a victory in the confidence vote has sent the market moving up. The actual news of the victory may then turn out to be something of a damp squib for the market.
With 12% gains before the actual event, it is possible that the Nifty may see at least a short term top on Wednesday morning when the market should open higher after the victory news.
Except for the very short term when euphoria rules the market, nothing has changed. As the Government continues, elections will be held on schedule, around march or April of 2009. And, what will the government do till then ? With Parliament divided right accross the middle, What can it do ? Not much.
Markets hate uncertainty. A November election would be cheered for the simple reason that the uncertainty will end soon. Now, the fate of the govt remains in the balance almost every day, the outcome of elections is unkonwn for a longer period of time - hardly a scenario for a long term bull market.
Thus, investors should stay away from this market until a pullback confirms that the trend has actually changed to up. Traders should go with market momentum which is UP. They should be prepared to take profits at the first signs of resistance, which may happen tomorrow after an expected gap up.