Saturday, May 22, 2010

Correction or Bear Market?

See, it is too early to say so, but please remember that we have been looking for weakness since mid april, when the nifty broke down below 5270. Instead of worrying about a correction or a bear market, we need to understand that we should not buy.This is what will protect us from any kind of decline. We have also suggested many times that investors should switch from mid cap / speculative stocks to blue chips.


The Nifty continues to follow a pattern of lower highs, lower lows. This pattern will get broken if he Nifty were to close above 5206. These levels will change over time. There are three qualifiers for defining a bear market:

1. Pattern of lower highs, lower lows
2. Trading below the 200 day moving average
3. Breaking below the previous intermediate low

The previous intermediate low was at 4675 made in Feb 2010. This has not been broken yet, although the first two points have been met.

So, this is still a correction. What do readers say?

Should you buy now?

15 comments:

Manjunath said...

Hi Sudershan,

Few points to note.

1.On an intraday basis Nifty has broken 200DMA but it hasn't closed below 200DMA which is a sign of strength.

2.Nifty is trading at a PE value just above 20.

So nifty above 200DMA & PE @ 20 its a buy.

Regards
Manjunath

naresh1711 said...

Hi
with 2 of 3 defining qualifiers in place, balance is tilted towards bear market unless either of two qualifiers tilt the balance back to make it an correction
Regards

Tarique Anwar said...

As per EWT, we as of now are seeing waves that look corrective in nature. Emphasis is on "corrective". So chances are Nifty will not violate your 3rd criteria and then rally higher. To elaborate we are seeing something called double zig-zag correction from highs of 5400 and till now have almost retraced 75% of the rally from 4675. We can definitely go lower from fridays opening lows, but as per my opinion and overall market knowledge we should break 5400 in the next leg.

Finally I admit I like your opinions a lot in CNBC!

Jitender Madan said...

In context of Indian markets, this appear to be correction as of now. to me 200 DMA for this market is not very low from nifty highs due to excessive run of market. Looking at world markets sometime feels like best of time may be ahead for bears. During entire 2009-2010 move bear seems to have very hard time. Indian markets appears to have something in their favor, markets are not bad even after panics in Dow or Nasdaq or Europe story. Indian market does not seem to be in state of fear and its only reacting for Europe troubles and not giving any anticipatory down move. To me there is definitely something in favor of Indian markets. I am unsure if its like India can be favorite place for parking global money or anything else. Nifty is trading in channel as of now with lower end of channel somewhere 4780. I will continue to believe nifty is trading in channel until broken. In 4800-4900 zone I would rather buy nifty with stop-loss of 4770. Below that I would like to watch for levels of previous low.

anshul said...

it will not end up like bear market of 2008-9...because that time everybody was not ready for bear market..this time its look like every body is ready for bear market ..whenever big number of people r ready for bear market ..it acts in opposite direction...yes i do believe moving below 200 day average shows bearishness but i do believe we r going up as soon the European woes settles down...that move would be quick very quick..lets hope for best....

satishhere said...

Nifty trading below 200 DMA , Last time in Bear Market Nifty cLosed below 200 DMA for some days then again move above 200 DMA N again went below 200DMA to enter Bear Market.....
So Lets See what happen this time....

kk said...

RESPECTED SIR
I HAVE BEEN YOUR FOLLOWER SINCE I STARTED TECHNICAL ANALYSIS.
SIR WHENEVER I HAD CONFUSION ON NIFTY I USED TO SEE RELIANCE CHART AND TO ME IT IS NOT GIVING ANY SIGNS OF A BROKEDOWN . IN FACT FOR LAST ONE COMPLETE YEAR IT IS JUST CONSOLIDATING IN A STIFF RANGE WHICH IS EXACTLY THE SAME IT DID IN 2004-05 .
AND SIR EVEN IF WE SEE LAST ONE YEAR NIFTY CHART IT IS CONSISTENTLY MAKING HIGHER TOPS AND HIGHER BOTTOMS. THIS TIME AROUND ALSO I THINK THIS SHOULD BE SEEN AS THE BOTTOM +-50 POINTS,AND TOMORROW WE SHOULD SEE A SMART PULLBACK.

Vivek Rattan said...

Sir,

I couldn't agree with you more! 4675 is a key inflection point of spot nifty. There is a lot of support for Nifty.

I'm keenly watching this key point. As long as nifty trades above this point we've all the possibility of a bounce.

Jagdish said...

The market being supreme cannot be commanded or predicted. It can only be played. So why indulge in the futile exercise of trying to outguess the market. Keep your stops and Just move with the flow.

prannyyyyyy said...

sir what to do with ambanis stock please throw some light

Avijeet said...

Sir,
Nifty now below 200 DMA also its weekly indicators like stochastic & macd is sharp falling. I am wait for its oversold .

men said...

Though it is a sell on rise market, and as we are flirting with the 200 dma, but can one look at all the stocks in the same way? Where will the bottom be no one knows, but one should at least start cherry picking your favourite stocks and follow a sip, investing around 5% on every decline and at the same time booking if any profits come.
Avoid naked positions in futures and buy options only would be the best way for fno. I COULD BE TOTALLY WRONG ALSO, SO TAKE THIS WITH A PINCH OF SALT.

jitu said...

If Dow cracks, nifty will crack too, N down is damn weak. We r not china, so we wouldnt b insulated frm world. Those who compare India with China hav very little knowledge. Chinese infrastructure is tens time better than india let alone other things. So we must see huge sell off from FIIs if world shows weakness. We may not b in financial problems but USA n EUROPE r definitely in problem. And dont forget dow correction of 1000 pts in few mints sum days b4. Buying is class action, selling is mass action

Vikrant said...

Hi Sudarshan,

At 4995, Nifty Broke the SIMPLE Day Moving Average (DMA), and everyone started to panic. Then, when Nifty broke the EXPONENTIAL Day Moving Average around 4900, we saw a new wave of panic among Technical Analysts.

I want to know what is the difference between Simple and Exponential Moving Averages? And also if you can kindly tell me which one should we prefer? Kindly help me sort out this confusion.

Regards,
Vikrant

munnu said...

Sir,
It is correction but it is of great magnitude.The important stocks of NIFTY such as TATA STEEL, HINDALCO, STERILITE are showing bearish patterns of greater magnitude.I think in this stocks minimum of 20% correction left, in the same way the bank nifty has formed bearish pattern which has target of 8500. The important pillars of NIFTY banks and commidity stocks are showing weakness so i think the correction may not end at 4700 but it may test post election gap of 2009.