When is the trend not your friend ?

Tom Demark says this: “The trend is your friend except when it is about to end”. This brings up the big question – what indications suggest an end to the trend ?

There may be many signs for a trend getting exhausted, but before searching for these signs, it is wise to identify the trend itself.

The Indian Stock Market has moved up from 920 in April 2003, to 6020 in November 2007. That’s a remarkable increase of over 6 times in 4+ years. After touching 6020, a correction may have started with the Nifty closing at 5700 on Thursday, November 8. There is a three day weekend ahead, with Friday as a holiday for Deepavali.

Now, the long term trend is the one that started from 920. That’s a rise of over 5100 points. A 300 point correction is not a sign that this uptrend is over. The primary trend is up – this is a long term bull market.

An intermediate uptrend started in August when the Nifty dipped to 4000, then rallied. This rally has seen a gain of 2000 points, about 50%.