Nifty has support at 4100

Nifty today touched a low of 4155 before bouncing back....It has significant support at 4100....Below 4100 it could retest the lows before the gap up happened on 19 May i.e. go down to the 3600 levels..

Its a cycle!

Fear and greed in action. Investment banks in UK are again hiring traders with aggressive bonuses..are we ready to start the cycle again?
http://www.ft.com/cms/s/0/13ce71c6-5fdd-11de-a09b-00144feabdc0.html

Beware of misleading headlines

I just saw a headline Real Estate up 170% in 3 months

Say a stock falls from Rs 100 to Rs 10...ie 90%
Then it rises from Rs 10 to Rs 27...ie by 170%

It is still down 63% from its peak
Most people don't realise this...they just read the headline that real estate is up 170% and think the next bull market is underway

So please treat such attention grabbing headlines with caution

Nifty breaks out of range

Nifty has broken out of the trading range 4450-4580 which it had been confined to for many days. It had broken out a few times before too only to come back into the range again. Let us see if it comes back into the range or continues its downard journey to 4097 and below!

Strange phenomenon

In rising (bull) markets, people are hoping for a correction because they didn't get the change to buy.

In falling (bear) markets, peope are hoping for the market to rise because they didn't get the chance to sell.

As I write this article the Nifty Futures is trading at 4669.

Most people are nodding wisely and saying the market will correct. What if it continues to 6000? These people will eventually jump on only to find the market fall after they have jumped on. This cycle will keep repeating itself.

Nifty is back in the range

Nifty is back in the range from 4450-4580. It broke upwards on the 4th and downwards on the 8th but both times returned soon into the range. There will be a breakout or breakdown soon. Time will tell which way Nifty decides to go. As always, we will try to follow it rather than predict which way it goes!

A few trending stocks make all the market's gains

Testing on historical data across stocks in Sensex, Nifty, dow, FTSE has proved the following:

1)Most stocks (about 70%) underperform the Index during the course of their lifetime.

2) A small subset produces all of the markets total gains.

This is because losses cannot be greater than -100% but returns can be far greater than +100%.

Every investor in the market feels he can outperform the market. Please analyse your portfolio and see the overall CAGR (compounded annual growth rate) from the time you FIRST started investing till date. You will be very lucky if it is more than 7-8%. It is probably better to put money in a FD. or switch to momentum based trading if you fancy 50% plus a year.

Nifty trading - 2009 performance so far

Results of Nifty trading in 2009 using short term high probability momentum trading based on Technical Analysis:

January 2009 - 14.8%
February 2009 - 0.6%
March 2009 - 4.8%
April 2009 - 22.1%
May 2009 - 12.6%

2009 YTD - 54.9%

Treat the market as thy friend and not thy enemy

This is to all those who were short on the market before the Nifty hit the circut on 18 May 2009....short covering further propelled the Nifty to higher highs. As of 1 June close, the Nifty is at 4549. Those who were short have lost substantial amount of their capital and many have got wiped out...once again.

The current momentum is up both in the short and intermediate time frame.

Listen to what the market is saying. Elliott wave enthusiasts are predicting the Sensex will touch 100,000 in 15 years. Retail investors have once again got interested in the market. FIIs are pumping in money again.

Whether such a scenario of Sensex 100,000 pans out or not, try and FOLLOW the market rather than PREDICT or OUTSMART it. Buy-and-hold doesn't work as timing the market is impossible. THE CAGR (Compounded Annual growth rate) for a buy-and-hold strategy in most cases works out to be less than a Fixed Deposit.

The Nifty started at a base level of 1000 in 1995 and is currently at 4000. The CAGR for this works out to be around 10% before taxes. Can you outsmart the market and make more than 10% CAGR by following buy-and-hold strategy? If yes maybe Warren Buffet needs your help cause he too is facing problems with this strategy.