Thursday, June 9, 2011

Cycles of Expansion and Contraction

This is a favorite topic. Old time readers will probably recall that I have written about expansion and contraction, many times earlier.

Markets go through periods of contraction when prices move in narrow range while trader interest comes down. These periods of narrow range are contraction.When markets are doing nothing, they are giving a message. The message is: the periods of contraction see a balance between bulls and bears. Neither is strong enough to take the market in their direction.

Soon enough, one of the two forces - either the bulls or the bears will emerge as the stronger force. Then comes a period of expansion, when the winning force will take the market sharply in its favor, trapping the losing force. This is the period when markets will move with large ranges, in any one direction.

Currently, as I write this on Thursday evening, the Nifty is in a period of contraction. Daily range has come down to just 40 points. Such a narrow range is unsustainable. I expect the market to give a big move, starting Friday.

1 comment:

viks said...

sir can u suggest any websites to track the market.