Dear Investor,
This week we should just let the market do its thing. Sit outside and watch the show. Its going to be very hard week on both sides. There is continued pressure on investors to put their money into market. It is very hard to have cash and not see it growing. especially in current market situation where there is no end in site. Day after day market only goes up. So the risk is virtually not there. I am not moving away from my theme of EXPECT CORRECTION. It will happen but does it mean you do not invest at all. Well that is not right. Not investing is never a good choice. Well, investing today will definitely going to test your patience. If you are selective in buying things might workout better for you otherwise there will be blood on the streets. There is a saying "When there is a blood on street, you buy property". In our case it will be we buy shares.
There is no sign that current rally has ended. In fact it is inviting more and more investors, getting them excited about the never ending rally and believe me they are coming in with all the cash they have. The MANIA is still not full on. If the rally continues like this we will see the MANIA unfold by end of this month.
I found very interesting correlation between today's market and market 10 years ago.
Following is a NIFTY chart from 1996 till Sep 06 where the new rally began which is running till date
Is it mere a chance that the month was SEP 2006. I don't know. If we observe correctly markets tumbled in SEP-OCT of 1999 and it rallied harder until SEP-OCT of 2000. After that it took 4 years before market rallied back to its old high. You know the month, SEP-OCT 2004. It paused at that level for three four months and then corrected 30%. It is that correction after which those investors have only seen gains in their portfolio.
Lets look at NIFTY today
After 2004 correction NIFTY only corrected in 2008 SEP-OCT along with global meltdown. That correction was exactly the same as previous 2000-2004 correction. Only thing different is 2008 correction was faster and old one was slower.
We have completely retraced the correction. We are at a juncture where a correction needs to be expected. at least to 4770. That will be the true golden point of entry if History has to repeat.
Question I do not have answer for is what to do when the correction happens, If it ever comes. Should hold on to loosing positions in order to buy more laters? I am not sure, but that is what I intend to do with my positions.
Now about history just a year ago - 2009 SEP-OCT
You can see in above chart that exactly in SEP-OCT 2009 market correctly. Question remains is will the history repeat this time?
Following NIFTY SEP-OCT 2010 that is todays market
There is no end of this rally. It continues its march up with no resistance in line now. There is no need to feel sad if you missed the rally. There are more individual stocks which are getting ready to move higher. In fact, this market action has given me more faith on bullish side than any other rally till date. If we can hit this target then I guess every correction is a buy. I am not announcing that correction will arrive. but I am planning for what to do when it arrives. You can't fix your past actions but must plan for future. You need a strategy for that otherwise you will end up taking emotional decisions and then suffer.
Now lets look at stocks which are just getting ready to breakout. There is good buying pressure on these. I am not planning to do any buying in next two weeks unless there is MANIA developed where people will pay any price for any stock. That is like shooting in the dark, you will hit some and miss some.
BL Kashyap
Delta Corporation
Dhampur Sugar
My action plan is to watch the show next two weeks. Thank you for your readership and survey answers. It keeps me going.
Wish you good luck and peace.
Thanks
Anil
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