The clock is ticking

Nifty weekly chart

Nifty Daily Chart

As we can see from the charts Nifty is approaching the resistance line which is around 5450 - 5475 levels in both daily and weekly charts. I expect a severe correction once Nifty hits these levels.

I believe that the global recovery which everyone is talking about will not sustain as it is based on government transfer to individual which now comprises 18% of personal income in US. 

Personal disposable income is not going to rise in US for years to come due to high unemployment which will prevail. 

I believe that this crisis is the crisis of savings. The US consumer had already been spending more than he earned. Boosting consumption further is like giving steroid to a weak man which may release temporary energy but once the dosage is exhausted the patience will be weaker. 

The government will have to remove fiscal stimulus and this will cause double dip recession. If the government continue the fiscal stimulus for next two three years or they will go bankrupt either directly(refusing to pay) or indirectly (inflation).

Globally the government has started unwinding the liquidity and as we all know that liquidity is the primary force which drives the market. Reducing liquidity will result into lower asset prices.

Consumptions which look booming right now will also subside once the fiscal stimulus is taken back. Right now all the economic indicators are positive but don’t bank on them. Equity market discounts future and not the past.

If you remember when the markets start moving up in march 2009 all economic indicator were negative but still the market went up as it was discounting the future.I believe that after six to nine months from now all economic indicators will be show a double dip recession and market will discount them now not nine months later.

I believe that this is the best time to start selling and lighten you position in stocks and bonds.