Go with the Trend

Just to cheer you up:
from www.marketwatch.com
Stocks in Europe ended Thursday at their worst closing levels in over two-and-a-half years.
Dow Industrials at nearly two year intra day low.
In India, if the Nifty were to reach its lowest level of the last two and a half years, it would be trading at 3000 (Today’s close: 4315). This tells us that Indian markets continue to outperform, and, if our market does decide to follow its European and American counterparts, there is a lot of room to move down.
Traders should ignore these warnings of doom and gloom. they should go with the flow of the market. In simpler language, go with the trend. The trend is firmly down for now, so either go short or stay away.
This is my third blog entry for the evening. two more are :
Brokerage Stocks are out of fashion
Bear market rallies; What did you Sell today ?
Just scroll down to read these entries.

Brokerage Stocks are Out of Fashion

http://www.marketwatch.com/, reports today:
Brokerage ratings cut
The Goldman analysts said in a research note that fundamentals for the major brokerages continue to deteriorate, adding that any recovery will take longer than originally anticipated.
….
“The turnaround in business trends that we had been expecting in the second half of 2008 may not occur as quickly as we would have thought,” Tanona wrote. “With client activity trends likely to slow down over the next couple of months, we felt a less aggressive stance … was warranted.”
While the USA has finally woken up to the risks associated with owning brokerage stocks, the Indian Investor has not yet become aware of the possible scenario in which brokerage stock prices can come tumbling down like Humpty Dumpty.
As an example, India Infoline is quoted at 550. The stock had started its bull market from 80 in July 2005 to touch 1975 in Janaury 2008. The share price remained above 550 for just 13 months, while it remained below 550 for 26 months – during the period when the bulls were in control. Support for the stock comes at 400, then at 225. Take your pick.
The next two years may well see a big carnage in the brokerage business, with just five major brokerages finally controlling 95% of the business, while many small boutique brokers will share the rest. This has happened in the USA, so it is not soemthing unusual.
Cost cutting, Cost cutting, Cost cutting …… brokerages which understand this concept may survive to see another bull market.

Bear Market Rallies – What did you sell today ?

This is not quite an original title, since a google search for ‘bear market rally’ threw up 3,62,000 links.
But that’s what the Indian Stock market is currently going through. After a low at 4100, yesterday, the Nifty moved up to a high of 4330 today, a rather dramatic up move of over 5% in two trading sessions. That’s five percent in a benchmark index – quite remarkable. Now, here is the disturbing news:
In a bear market, every decline is interrupted by sudden but all too brief period of optimism, known to traders as “bear market rallies”.
It is fair to suggest that the two day rally which the Nifty has just seen is a correction in a down trend. Just as corrections in an up trend bring prices down, so the corrections in a down trend take prices up. In an uptrend, corrections are low risk buying opportunities. Then, in a downtrend, corrections are low risk selling opportunities.
So, what did you sell today ?