Tuesday, September 30, 2008

Oversold markets will bounce back

The Nifty had witnessed five days of declines in the last six days. The nature of markets is mean reverting, to some extent. After substantial declines, a rally of some kind was expected. This rally came today, on the back of the largest ever decline in the American markets.
Markets will continue to surprise us. There was no impact of the American meltdown. Instead, what we saw was a classic bear rally, sharp and swift, taking most participants by surprise.

Does today's rally change the picture ? This question comes up rather quickly. The answer is, NO. Markets will go through cycles of optimism and pessimism. Today's rally, surprising as it was, may be taken as part of a reaction to a lot of pessimism.

The Nifty faces strong resistance around 4150 approximately. The Index should close above this level to start the process of a possible bull market. Let this event happen, then we will review the position afresh. Till then, we assume that any upmove is a bear market rally.


Anuj said...

Hi Sudarshan ji and readers,
Yes indeed markets rebound from oversold zones as described by Sudarshan himself….generally markets tend to peak out around 20 DMA which is 4200 as of today with support still at 3800 intact…so rally will most likely to end in 4100-4200 level..
Timing these rally is very difficult…Sir if you can shed some light on how to effectively trade these rallies it will be great…I prefer to stay away from trading these, capital saved is better than a loss…
Long term trend is down…3600 is quite possible in the near term….3600-4100 might be the next developing range for next 3 months….but who knows what Mr Bush and Paulson wants…let’s see…and take one step at a time and enjoy the learning from Sudarshan ji….Mr. “B” and Mr. “P” only increase my BP(blood pressure) and I am losing my sleep tracking Dow!!!....:)

Deepak says sudershan is Best said...

Dear Mr sukhani ,As u suggested that after 3800 there is no support and there could be free fall ,Which is quite possible ....

In my small carrer of 6 months in share market there is one thing which i understood if market is overbought it will fall if oversold than will rise it totally depends on fall which cud be 3800 from 5300 or 3800 from 4650....the ratio will be according to fall...........

you can expect atleast 50% bounce so in this case even if market fall from here it will bounce back isnt it ?

If you could please write any article on working of market and one more thing can fII's can go naked short sell ...........

gurvi said...

Hi Sudarshan ji,
I'm a great fan of you. I read your blogs daily without failure and anxiously wait for it everyday.
You mostly talk about Nifty in your blogs, can you be please talk about Sector level if not stock specific.
It will be great help for the retail investors like me.

Many thanks.