Monday, June 22, 2009

What is a bear market?

What is a Bear Market? This question is crazy after we have seen our market almost double in three months. Well, Russia is having one, right now. reports that Russian stocks have fallen 20% from their highs, starting a bear market, the first one among important indices since March 2009.

With a high made at 4700 approx in the Nifty, we will also have a bear move if the Nifty trades below 4700 - 940 = 3760. I think it may trade below this level, but I would not call it a bear market, just as I do not think that we are in a bull market - it is an uptrend.

I am looking at 4200 as the dividing line for a dip or a deep correction. My charts suggest a lot of support around this level. If the Nifty breaks below this support, I have to accept that much lower levels are possible.

For me, the actionable ideas that emerge from this analysis are:
Below 4200,
I will not plan any investment buying. Buying is no longer on dips. Buy on panic declines ( a little) and after signs of a base (will take time).
Long only Swing trades should be avoided since momentum is no longer in favor of bulls.
Sell Calls on rallies in Nifty , actively traded stocks.
Day trades can be on both sides, avoiding selling after one down day, avoiding buying after one up day.

Now we know it: The Boom that we saw was not the result of intelligent policy making - It was -Good Luck . This is what probability is about. Sometimes it works against you, sometimes in your favor. The boom was a set of circumstances that worked in our favor. If you want to find more, read the link.


CHANDU said...

Great analysis,But we may find support @4090.If we break 4200 tomorrow.May be we will go to 4100 and bounce back to 4500.
And only close below 4100 will take us to 3800.

Any comments sir.

A Student for Life, of Life (and of Markets) said...

The way Dow Jones broke down yesterday, Nifty is unlikely to find support at 4100.

I analysed this in my blog which can be read here.

Student of Market

rohit said...

Sir lot of analyt are saying 4100 as benchmark for support,but according to it is 4200,so please tell us why 4200 ,because 4100 was low after election result so that is considered as support ,but abt 4200 pleae tell the reason

men said...

Mr. Sudarshan,
After getting knocked down from 4700 you are now saying it is not a buy on declines, just think what if one shorted before the election, bot on declines as suggested earlier, and now after everything is over you are saying it is not a buy on declines? I am unable to understand, may be it is my limitation, could you please clarify, just where I am missing you.

Bramesh said...


Today we moved below 4200 but not able to sustained market again fooled the traders adn many are stuck with short positions.Now i see 2 days of uptrend and might be we may expire near 4400-4440 if 4375 is crossed and sustained tomorrow.Whats ur thought on this sir?

A Student for Life, of Life (and of Markets) said...

Sudarshanji is definitely capable of defending 4200/4100 or whatever level he has suggested,

but here are my two cents for the aggrieved traders.

First of all, there is no logical contradiction in suggesting buy on dips and now not suggesting it. Any individual trader will have her/his support levels until which s/he will buy on dips and below which s/he will no longer buy on dips.

Now, any support level breakdown is again a probabilistic event - the very fact that it is being called a breakdown means that it is a high probability event , BUT of course once in a while it will be a false breakdown or a breakdown that will see a whipsaw before going down again.

For myself, I had a bad bad day. Yesterday I ended with a long thinking that 4200 will hold. Of course it did not hold and this morning first thing I exited that trade and went short at 4180 with SL at 4115. Of course I suffered a loss AGAIN, but then it finally dawned on me that 4160 AND 421O are acting as support and resistance. I successfully used these facts to finaly end the day with negative -37 as opposed to -79 the situation I was in after the second trade.

I am writing all this to point out that day trading is neither a piece of cake nor can be done with just analysts comments and blogs. Of course if you buy a service that is a different story. Equally important, even though I am depressed about today's trade, I hold no one else responsible for it but myself.

Warm regards to all;


solo said...

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