Bull Market corrections are sharp, swift and brutal. It's like a mid air turbulence, that can scare the hell out of people - but that's about it. That's precisely what happened yesterday.
Experienced folks do ride out the turbulence but some scream, and that's ok. But remember, if the turbulence lasts longer - it does scare even the experienced ones. Hopefully, the current turbulence would not last longer. Well, that's what it looks like as of now.
Here's the Technical picture of Nifty. There is a drop in altitude from near 8200 levels to 7900 levels but Nifty is still well above all leading moving averages, which means the market is buy on dips.
When will it start to scare investors? - If Nifty dips below 100 dma/August 08 Lows of 7520 - then yes lots of people will start doubting the rally and more selling pressure may come in. But that's too far and looks unlikely as of now.
What's likely as of now?: Stabilization of the Nifty and a sideways action with 50 day moving average as solid support. Traders for sure will panic if market corrects below 50 dma.
What happened in US?
S&P500 made a stunning comeback. Reasoning:
1. China QE news: China's central bank announced that it will provide $81 billion in loans to its biggest banks.
2. Market positioning itself for dovish Fed on Wednesday.
This is becoming too predictable. Everytime any economy is in trouble - Central Banks have a new solution: Print money
What US Fed can announce?: Status quo
What Traders are watching?: 1. When Fed will hike rates; 2. Scottish referendum vote on Thursday and 3. Alibaba IPO on Friday
There is very thin line between wishful thinking and objective analysis.
That’s the beauty of the market – you can say anything you want and there is always x% chance that you might be true. This is the reason people say bizarre things all the time
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers