Strategist Teun Draaisma (from Morgan Stanley) is telling clients to take advantage of the recent rally to SELL.
Draasima says none of the signposts which will call an end to this downturn - US housing, banks’ balance sheets and corporate earnings - are flashing green. In fact the fundamentals are not turning at all, says the Morgan Stanley man.
So, where are the markets, now ?
Teun says "We are currently in one of those classical 20%+ bear market rallies on the hopes of successful policy action. For instance, in the US between 1930 and 1932, there were five 20%+ such rallies (up to 35%) lasting 35 days on average."
Now, I am writing this at 8:40 Pm when I know that the Dow is down 104 points. So, I have the benefit of some hindsight. But, to be fair to me, this view was formulated at 5 PM today when I wrote our daily newsletter to clients. I said, "A technically driven market instead of a bull market." Again, I wrote "Should we become cautious at the current juncture ? The answer seems to be: yes for Traders!"
How do you become cautious ? By not taking new positions on breakouts. Buy only on dips. Then, keep tight stop losses.
Kevin Lane is one of the founding partners of Fusion Analytics, says: From a trading perspective the best way to play this market, (especially for those investors who bought aggressively a few weeks) is to place tight trailing stops (such as a penetration of the 5 or 10 day simple moving average) on your positions and letting the stocks weakness take you out at a profit rather than trying to sell at the exact right market resistance level.
Based on his thoughts, I have formulated a view on the Nifty: An alternative could be selling ½ of your profitable holdings @ 3400 (with trailing stops on the balance). A final alternative could be selling everything if the market gets to 3700 (or if it gets above 3400 but fails to stay there and then trades back below 3400). If you make strategic sales there will be a chance to buy stocks again, the question is will it be lower or higher than here ? The jury is still out. The question one has to ask is will I feel worse if I sell nothing and the market pulls back or would I feel worse if I make some profitable sales and the market goes higher after I sell. Depending on how you answer those questions will go a long way as to determining your strategy.
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3 comments:
Mr Sudarshan, I am 25 and a newbie to world of markets...but I am regular to your blog.There is so much to learn from you. I think you are one of the very few genuine commentators on TV and also like you bloggin style...you project both sides of the coin and leave it to the readers to take a responsible call! On the downside, newbies like me who cant make out wrong from right, are left confused :-P like in this case, I would feel worse in either case, if I sell and market shoots up or if I sell nothing and market crashes :-P
Please keep blogging and discuss and teach as much fundamentals as you can...
God Bless,
-Ashish
sir ji excellent
From the last two months I am following your commentary on CNBC, and believe me I emerged as great fan of you. I am a novice in the market, but have access to global as well as domestic economic information. Friday I bought nifty future and carried it to Monday. On Monday the market open high, as I expected, and then during the day it goes 70 point lower than its intraday high but I took the call and carry it for next trading day (Wednesday). On Monday, almost all the analysts were suggesting that the market is expected to touch 3400-3700 mark. On Tuesday evening the same analyst are bearish about the market. I just wanted to know whether only global cues are driving Indian market or any fundamental strength in our country will help our market to outperform. And finally, please suggest me what should I expect in the running week.
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