WSJ.Com reports : "Analysts at Italian bank UniCredit are warning investors to keep their guard up even as the Christmas holiday approaches.
With the meeting of Dubai creditors today, uncertainty on Greece still looming and year-end seasonal factors, investors should stay in risk aversion mode,” they said in a note today."
What is Risk Aversion? Nobletrading.com says "Risk Aversion is the inverse of risk tolerance. Risk averse is defined as the behavior of a trader to stay away from risky trading practices, even if those have high chances of profits. Risk averse traders prefer low risk, often low profitable, products to trade. Risk aversion is seen in trading of all products including stocks, bonds, funds, options, futures and currencies."
Traders may move money from 'risky' assets to assets where risk is less. The stock market, usually classifies as a 'risky' asset, at least relatively. Money may move to Govt Bonds / Fixed Deposits, which are taken as 'safe' assets.
How do you become risk averse? Suppose you feel that markets may remain uncertain so you wish to avoid risk. What is the next step?
a) Sell exisitng holdings, and, do not invest further
b) Retain existing holdings, and, do not invest further
c) Sell some holdings, and, do not invest further
So, the common denominator is: 'do not invest further' - fresh money stops coming in the market. If this is so, money may stay away till (1) investors are willing to risk again, OR (2) Valuations become attractive to change risk aversion.
This narration does not have an ending. Nifty chart is suggesting a rounding top + a double top (unconfirmed). Maybe there is more downside.