Sunday, January 1, 2012

Starting the New Year in a bear market

The calendar year 2012 starts with stocks in a bear market. It is not stocks alone, other asset classes such as gold, silver and real estate (in most cities) are also seeing decline or consolidation in prices.

For the stock market, it is quite possible that the year 2012 may actually bring good news to the bulls. The current bear market started in Nov 2010. Bear markets seldom last for more than 2 years, in fact they end in anything between 12 to 18 months. If we follow the same pattern, we are probably seeing the last Phase of the bear market. Surely, this is good news for bulls?

For investors, cash is king. Money can be deployed in the best blue chip stocks on an SIP - which is a systematic investment plan, in which regular investments are made usually once a month. Investors should NOT attempt to dabble in mid cap or small cap stocks. It is too early for such investment.

For traders, the nature of the market (bull or bear) is much less relevant. Trading is done based on setups. The main difference is in position sizing. Usually, bull markets offer larger rewards and remain easier to trades in. Therefore, positions increase in size when trading within bull markets.

8 comments:

Nirav said...

Sir,

If I am a trend follower then how can I position size?

summit said...

when we come to know about the start of bull market,will midcap company not give good returns compared to blue chip?.or is there any specific reason to invest in blue-chip only...

Tomichan said...

I have startled to see a red finish on last day. That too in final hour. What the outlook for hdil? Its not giving dividents as in the case of selmcl. That alone may drift it lower? It should have been above 120 levels at this point of time sudarshan sir. I wish u to be known as the emperor of indian market within few years. A portion of which can be used for disabled and poor. God loves u and i too.

Balu said...

Wish you a very very happy and prosperous new year sir..

Balu

pranav.kulkarni said...

Dear Sir,
According to you how much importance should one give to different time frames??? Does monthly, quartely, yearly charts matters???

thanks and regards,
pranav kulkarni

ameet said...

happy new year sir..sir which software is best to improve our market anlysis..???

SWEETY said...

hello sir, looks like market is starting to factoring in the ensuing rate cut - crr cut by rbi... if i am right we might actually see a gap up tomorrow nf 4710-4720 area -- that might give a breakout of the falling trend line from the peak of 2011 - i donot know the sustainability of such breakout... but expecting some euphoria... lets c.

mbn said...

Sudarshan Ji ,
Completed reading half of ur book. I liked it the way u tried to analyze wid out prejudice.high respect for u and recommend everyone to buy this book.
Regards
mbn