Diwali 2008 vs Diwali 2009

What a change in sentiment between Diwali 2008 and Diwali 2009.

Diwali 2008 everyone was morose and convinced the bear market is here to stay. It also coincided with the best time to enter the market and would have given 100% returns in 12 months

Diwali 2009 - everyone is happy and bullish. People's PMS and Mutual fund investments arecoming back to positive (basically 0% return over 4 years but people are still relived to have no losses). The last few bears are turning bullish.

Conclusion - be careful. We might be entering the last leg of the bull rally

When I say might it is because as a trader we have to be open to both possibilities. that is the beauty of stop losses.

Currently I am long in the Nifty and riding the rally. How do we know the market has turned bearish and time to go short? The market will tell us - and I will let you know. Just keep watching this space.

Nifty bearish

Nifty has become bearish on 18 August...We have been rangebound between 3900 and 4700...a move outside these points will decide the intermediate direction of the market....we are at a critical juncture now....but as of now the trend appears bearish...

Nifty bearish in short term

As I write this post Nifty is at 3918. Nifty could easily decline to 3700-3750 levels as part of a 38% retracement of the rise from 2300 levels to 4700 levels.

Bear Rally?

The Nifty has rallied smartly in the past few weeks from a low of 2525 on 6 March to 3687 on May 16. The media is glorifying this by saying this is a 46% increase. A few points regarding this:

1) If something falls from a high like say 6000 to 2200 any rise above that from 2200 will be a huge percentage gain. But it is still a huge drop from the 6000 levels
2) There are very few "lucky souls" who bought at 2200 levels when the market was gripped with fear
3)So is this the start of a bull amrket. if one were to do a simple Fibonacci Retracement Analysis from the high of jan 2008 to the fall to 2228 on 27 October 2008 one will observe that 3800 levels is a 38.2% retracement of the fall.

A bear market is characterised by strong rallies. 30-40% up moves are very common from the lows. Only time will tell whether this is a bull market starting or a bear market rally. As a day trader, frankly I don't care. But my advise to traders and investors is to be careful and always have your stops in place.

The market is a beast

Someone once said the objective of a bull market is to advance as far as possible without any people getting in. A bear market falls as low as possible without many people getting out. The typical investor gets interested in the market at the top of every bull trend and get scared out at the bottoms. Also at the beginning of a bull market most people are traders. At the top they were all investors.

This is the reason 95% of people lose money in the market.

Buy-and-hold doesn't work except for a lucky few.

Question: How do we make money then?
Answer: Short term momentum trading using Technical Analysis

Nifty extremely bearish

The Nifty is extremely bearish now...all indicators are pointing downwards and the current momentum is down...Initiate or stay short!