Looking at the market action I think market have made immediate term bottom and therefore if anyone have shorted the market it will be a good time to book your profits. Keep a stop loss of 4700 If you go long on market form these levels for 5 -6 % pull back.
Although I dont try to justify market action and I believe that price movement are always followed by requisite news which justifies price movement ex post. I think that the current correction is largely due to the insolvent European banking system which is highly leveraged more than 25 X. The size of European banks compared to GDP is also 5X that of US, therefore in case of European bank failures it would be very difficult to save them. Also consider that Government throughout the globe have spent all their fire power in 2008 recession.
If these assumptions will come true then we are getting into a multi-year bear market which is also indicated on charts.
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| Nifty charts. |
In the given chart I have tweaked retracement levels a bit in order to be conservative and believe that market will take a breather 38.2% retracement and will atleast give a decent pull back form here. Also there is high probability that some positive news flow may come during this weekend which will halt the market declines (temporarily)
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