Thursday's late rally in Indian stocks had me believe for a while that the previous lows of 4500-4550 nifty will provide some strong support and the downside will halt temporarily.
In addition, the follow through day in US S&P600 tempted me to think there is a glitter of hope in the markets.
However, in just 24 hours, both markets failed miserably and proved again how the best strategy in a bear market is 1) to be in cash and 2) to NOT cut the shorts too soon and not do any LONGs. It also proved how the 200 day averages are very strong resistances for the market indices and stocks.
I had cut most of my shorts yesterday seeing the powerful short-covering rally end-of-day - in DLF, HDIL, Kotak, REL, RELCAP and I was quite sad today to see the hammering they got again today - the sadder thing would be I don't get a chance to short these again at those levels.
The only bullish signs are: extremely high short interest ratios and advisory reports, supposedly high cash levels in investors in US. (not 100% sure about these things either!)
I think the US follow through has been nullified by todays BIG downturn.
My view on OIL and GOLD (based on the support they were getting at lower levels) has proved out to be damn accurate - as in 36 hours, OIL is $15 up and GOLD is $25-$30 up. I wish I had acted on my views more boldly.
For Indian market - I still think 4450-4550 nifty range will not be breached in a hurry - primarily since most advisors and people believe that they will break and lot of people are short already (I have no indicators, so this is just my view!). A rally to 4730 and maybe (small possibility) even 4820 might happen next week. This could be due to gains in OIL stocks, IT stocks and Pharma stocks - along with possible bounces in heavily oversold sectors of realties and banks. Playing for this bounce will however be very difficult and not advisable.
It would be better, instead, to let the market rally and accumulate shorting positions.
Outperforming groups: IT, Pharma, Chemicals
Underperforming groups: Realties, PSU Banks, Private Banks,
Long-Term view: bearish
Intermediate-Term: bearish
Short-Term: neutral to bearish
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