We had suggested in our newsletter yesterday that the decline witnessed yesterday could be just making a shoulder or could be a new decline. We had also mentioned that in case it is a second shoulder being formed then support could be found near the low of the first shoulder at 4621. Though, it is not a rule that the low/high of the first shoulder should be close to the low/high of the first shoulder, yet since the pattern was thought to be a straighter pattern, we thought that support would come in between 4600 and 4650. And that is exactly what happened. The Nifty reversed from 4629, made a high of 4785 and then ended the day at 4745. Now, it actually looks like a second shoulder is forming.
We shall still be vulnerable to negative/positive news from within/outside India. Any drastic movement in the American markets tonight and in Asian markets tomorrow morning will have an effect on India too. At the time of writing of the newsletter, all European markets were between 1% and 2% up. So, no negative cues from Europe as of now. Since, we shall be following the world markets, there is no point predicting what will happen to our markets. As discussed yesterday, we shall follow the market in what it wants to do. At the moment, all we can say is that we have supports at 4630 and 4480 and resistances at 4800 and 4960.
In a previous newsletter we had spoken about the prospects of the Dow Jones Industrial Average (DJIA). We had said that a move above 12400 for the Dow will make stop the pattern of lower highs lower lows in the RSI. That did happen recently, the RSI did make a higher high. Now all that is left to be seen is whether it will make a lower low or a higher low. Strong resistance is still at 12750. While there are no buying signals that we are getting from the DJIA as of now, but some positives are visible. There is a bullish divergence visible between the RSI and the DJIA.
Whenever there is a massive fall in the markets, the investors lose their confidence in the markets and are not comfortable buying because they don’t know when the bottom will be made. It is only after a bottom has been made that the markets start recovering. The investors are still waiting to see whether it is just a bear market rally or a new recovery. That is clear only after the next bottom is made, which is almost always a higher bottom. The recovery that then follows is slow in the beginning and gradually picks up speed and momentum. That is the surest sign that the markets have recovered. But where do we figure in these stages? I personally feel that a bottom has already been made. A slow and nervous recovery came about and we probably are in the process of forming a higher bottom. These are only indications. Surety will come after the markets tell us. We can just hope for the best. Maybe the Dow will recover soon and maybe our markets will recover. There are signs of recovery visible and these markets shall, eventually, recover. The only question is when. Soon, we hope. But surely,
Hum Honge Kaamyab, Hum Honge Kaamyab,
Hom Honge Kaamyab ........... Ek Din.
Ho Ho Man Mein Hai Vishwas, Poora Hai Vishwas,
Ki Hom Honge Kaamyab ........... Ek Din.
As mentioned in earlier newsletters, we are inviting our esteemed readers to send in their contributions in the form of articles to be published on this page. Take this opportunity to voice your opinions to the world about the market today, the markets in general or anything remotely connected to the markets. Please e-mail your articles and don’t forget to mention your name and location so that you are given due credit for the article that is published.
Happy investing!!!
Update: This article was also published on the business and investing page of Reuters.
No comments:
Post a Comment