Can market bounce back?

Can market bounce back?

If any pullback has to happen, it has to happen now because we are within 100 points of breaking the March low of 8,270.

The market right now is in complete grip of bears and it is so much in grip of bears that even if on the screen it is looking like it is easy to make money; it actually is because you could short the market at any point and still make money. 

Normally that kind of phase does not last for long but this is almost like bear saying we have told you this market is going down and we are taking this market down. This is a zone for the market. If any pullback has to happen, it has to happen now because we are within 100 points of breaking the March low of 8,270. Why is that important? That’s important for two reasons – one, it coincides with rising 200 day moving average but second and probably more important, if broker – that would establish the first lower top-lower bottom formation for the market in this bull market. Normally that is a bit of a worry because that could mean that the market in the near term could be – and I measure my words – could be in a bit of a bear market, a cyclical bear market within a structural bull market. So that’s something that you have to worry about. The market can correct 20 percent and still be in a bull market – make no mistake about that but you have seen the pain with 9 percent correction. Imagine the kind of pain that would come with 20 percent correction. 

So the big worry for the market has been earnings and the earnings are just not matching up. If the frontbenchers are coming out with this kind of earnings, imagine what would happen with the backbenchers and that is a big worry for the market. Foreign institutional investors (FIIs) yesterday – there are two ways to look at things – (1) if you were to exclude Sun deal, there were still net sellers but why should we exclude the Sun deal. It is telling you a lot about the Indian market from a long-term investment point of view. USD 3.5 billion gets absorbed in a single day, is not a joke. It is telling you about the depth of the market. So that point is taken but everything is good at a price and that’s why the deal took place at 10 percent discount and that is the key for this market, the valuation and that still needs some flushing out and that’s what is happening and this market is giving incredible long only buying opportunities from portfolio point of view but from trading point of view this is a market in which you are not going to make too much money if you go by bravado. 

You have to respect the screen and see where it goes but if a bounce back has to happen, it has to happen now.

Happy Investing

Source : Moneycontrol.com