"When everybody sits on the same side of the boat, then boat can overturn"
Will this happen when it comes to US market? This is one question everyone seems to be asking right now OR Bulls will be able to save the market once again. Unfortunately, nobody knows. Let us look at the data point:
Here's what happened today:
Just look at the selling in Russel 2000 (domestic US mid cap stocks). The market internals have deteriorated in last few days.
Technically, it's not good news for people who follow price action.
When a trending market breaks a moving average: it does send panicky alarm signals to trading community. S&P 500 too closed below 50 dma. Technically, it means - S&P500 can slip back to 100 dma or 200 dma. That will be huge correction. Now, remember...we are talking what can happen not what will happen. Nobody knows what will happen
But remember, Globally markets are in uptrend and hence Trends should persist and Bulls should be able to get liquidity at lower levels. The chart below indicates strong support near 2320-2335
It means Bulls can hope that market will bounce back from 2320-2325 and it's not over yet. But keep an eye on other moving parts: Fear Index has spiked up and broken out above key resistance. It means wider trading community not hopeful and people have started buying insurance against the fall.
What about India and Emerging markets?
Here's the Good news - despite selling in US market and domestic stocks - Emerging Market closed up 0.49% today. It reiterates my thesis
Technically...2017 is looking like Year of Mean Reversion....very early signs. Developed market will pullback while EMs will rally
— Deepak Singh (@smarket) April 10, 2017
What does this all mean?
US economy is doing fine. But US markets have runaway too much and one cannot rule out gradual pullback. But equities will find support because of helpful interest rates environment and status quoist policies
There is nothing much to worry when it comes to Indian stock market. Everything looks ok as of now. Nifty has recently broken out above 9000 and pullback in US market will only lead to more sideways healthy consolidation. India will benefit from positive sentiment on Emerging markets. Remember...India is now the best performing market
Indian stock market now the top performer in 2017 pic.twitter.com/uqTuDToabY
— Deepak Singh (@smarket) April 12, 2017
Indian market will be able to withstand gradual pullback in US market. It's only panic type selling in US market that can cause serious disruption, which as of now looks unlikely. But in markets, you never know
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