Market in Past…

Whenever market reaches near tops, euphoria starts building up, everyone will start talking about higher and higher levels. Experience suggests that it’s time to stay alert. This time there is lot of difference between Aug’08 rally, Nov’10 rally and this rally.

In 2008, it was clear up trending market, and still we remember every Tom, Dick & Harry wants to be part of the market, including this author. It was the market, where every Large Cap and Mid Cap and even Small Caps were in news. Analysts were looking better value in every stock. Graduating student want to either be Analyst or Investment Banker. We have seen in Mumbai Local Trains people started talking about Sensex and Nifty (Similar or much better scenario was developed in the Dot Com Bubble 1998-2001)

From the beginning of 2008 till end market was in clear downtrend, tested almost 2250 levels from the highs of 6357.10, which was one of the sharpest fall in the history of Indian Stock Market. Lehman Brothers Collapsed and within a year our Indian Market has lost almost 65% of price gains. Everything was scary at this time.

Then market formed a bottom in next 3 months of 2009 and started fresh up leg, but here nobody has guts to come and accept the challenge.     From 2009 to near the end of 2010 more or less market remained positive and expectation were high. Finally on 5 Nov’10 Nifty posted a high of 6338.50 which was slightly lower than high of 2008; it was again the time of Diwali, brokers were out with their rosy reports of the market and running behind to suggest some multi-beggar stock ideas which can make their clients wealthier. Rest is history and everybody knows that what happens just next day after Diwali.

From End of 2010 to end of 2011 market re-entered into bad phase (as a bull by mentality, we can’t accept the fact of falling market), but this time market formed a higher bottom at 4531 in Dec’11, and started moving higher.

Now, if we analyze price action from the beginning of 2012 than we can notice that, initial two months of 2012 was giving clear sign that market has started fresh impulse leg, but subsequent move is little choppy, where you have to keep cross check on every move of the market.

Up to Jan’13 rally was in tandem (that is what we believe), correction from Feb’13 to mid Apr’13 was fine, but rest all move is little skeptical. Recently in Aug’13 market posted a low of 5118 and recovered from that low in matter of eight weeks (till date) is little surprising.

Little technical here, if we ignore earlier leg and consider move Aug low of 5118 to 18 Oct’13 Friday’s high of 6201, in totality its almost 1082 points move which 21% rise, that too in very short span of time, forcing everyone to relook at things. Because, till date these move is appearing in 3 wave structure. Now considering this thing, if it is fresh Impulse leg than maybe we can expect much higher levels.

But, if we understand and analyze market sentiment, than it is suggesting one obvious thing that don’t get carried away, at Tops we’ll always find Euphoria Building up and that is trap where every Retail participant fall into.

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