Almost all the email / comments I receive in this blog have been appreciative. Now, like a favorite student admonished by the teacher, I am receiving comments that I seem to have strayed from the path of technical analysis.
The Nifty closed at 3818.30, the lowest weekly close since 8 April, 2007. If we are closing at the lows of 18 months, we are in a bear market.
Follow the trend, is a basic maxim in technical analysis. Then, most of our trading should be on the short side. The bear market is assumed to continue until proved otherwise. What is the proof of a new bull market ? If the Nifty closes above 4300 (the last intermediate high), we may well say that a new up move has started. (The 4300 number will change with time).
Within an intermediate down trend, there will be sharp rallies. This is the nature of the bear market.
Trading, then, is possible for taking short positions on rallies (going with the primary trend), and, also for intra day / 2 or 3 day up moves that can emerge suddenly.
Goldman Sachs now predicts the US recession will be "significantly deeper" than previously thought. 'Headline' unemployment (the number cited by the Bureau of Statistics) will reach 8% by 4Q09. Also, 3Q08 GDP growth will be 0.0% at best. U6, a broader measure of unemployment and underemployment used by Bureau of Labor Statistics but not often publicized, now stands at 11%.