Mayhem At Wall Street

On  15Oct 2014 US equity market collapsed to such an extent that it felt like a mini crash. Dow Jones Industrial Average capitulated from day high of 16313 to a day low of 15855, finally closing at some respectable score of 16141. One can well imagine the plight of traders on the long side who had to endure a plummet in Dow of 458 points in single trading session. It must have felt as if the Day of Reckoning has come.

The silver lining to this scary tale is the closing point of Dow. The recovery in late trade was remarkable and it is harbinger of better things to come. Technical chart of Dow is showing a 'Hammer' in candlestick pattern. This means that Dow for the present should not go below 15855. In coming days we can expect Dow to rise from this hammered price of 15855 to at least 16588, which is the 200 day moving average line.

Good Luck!

Dow Witnessing Tug of War Amid Bulls & Bears

On 14 Oct 2014 Dow closed in negative territory, down a mere 5.88 points or 0.04%. It was the straight fourth down day for Dow. This happened after Dow steadily climbed above 16450 in morning trade. The slide was unnerving for some. It showed how all strengths were sold into. Sell on rise must have been the call amongst influential traders. Bulls must be licking their wounds after this sustained Bear hug in second half of trade yesterday.

Now the clamour has grown louder that Dow has entered Bear territory. "Sell your portfolio and sit on cash"  is the advice from experts. They are pointing out that Dow has decisively broken below 200 day moving average. This is construed as significant pointer to Bear market and a clear signal for the end of Bull run. I beg to differ.

For last two decades, every time Dow has violated 200 day moving average it has bounced back with fresh vigour to go beyond its previous high.  You can check the veracity of my observation from record of Dow movement in recent past. In June 2012 Dow dropped below 200 day moving average almost to a level of 12000. Within about four months it rebounded to above 13500. Again in Nov 2012 Dow pulled back below 200 day moving average to level of 12500, only to bounce back with vengeance to 16600 by Dec 2013. In Feb 2014 it again violated 200 day moving average of 15500, only to spring back to 173500 in Sep 2014.

My short point is that closing below 200 day moving average encourages Bulls to pick up stocks at relatively comfortable prices. And that is what is expected of Dow in coming days. If that doesn't happen then Dow will make history of sorts by not bouncing back above its previous high after breaching 200 day moving average for the first time in 25 years!!

Now lets wait and see in coming days whether I am on right track. If you recall from my preceding post, I had set the target for Dow to move from level of 16400 to 18000. We are witnessing these gyrations and volatility in Dow as precursor to positive rebound, which will take it beyond its all time high. Isn't it how Dow has behaved in the last 25 years? So stay invested and trade on the buy side.

Dance of Dow

Whichever part of the planet you may be inhabiting, you need to keep an eye on Dow Jones Industrial Average if you want to trade safely and profitably. Major turns in any market are foretold by Dow. And a trader knows how painful things can become if he is sitting on wrong side of a trade when such inflection points come.

It is with this thought in mind I got down to analyzing  the various aspects of Dow movement with a keen eye. My sole aim was to discern future expected inflection points of Dow so that I could be make myself safe, trading in Indian equity market. This was essentially required in order to know whether we have  meltdown of US markets on the cards. Of late noise of imminent US market crash has been growing louder from across the Atlantic.

On thorough analysis I came to the conclusion that Dow has still some steam left to chug northwards. I posted my findings as comments to an article in MarketWatch on 13 Oct 2014. I commented verbatim as given below:-

"You are right Michael. But one can expect a bounce in DJIA from 16400 level, which can take it to about 18000. From level of 18000, Dow should fall by about 1500/2000 points. It will again bounce back and reach level of 20000. Finally from level of 20000 Dow can lose more than 10000 points. Bulls still have some time to cheer!"

To this comment I got a prompt reply from MarketWatch moderator as follows:-
 "@Surajit Debnath

So, let me get this right; you're not just making one future call but 4 !!
1) Market will bounce from 16400 to 18000
2) Market will then drop 1500/2000 points
3) Market will then rise to 20000
4) Market will then fall to 10000
You must be the richest person in the history of mankind if you can make calls this accurate."

My reply:-
"@M W Watch the story unfold within a year"

MarketWatch reply:-

"@Surajit Debnath 

Why don't you go one better and make a real name for yourself. Setup a website, disclose your actual name, contact details etc., post these predictions, put your money on the line (like you expect your readers to do), scan and post the broker notes, and then remind us all in a year about your success. Do it all up-front, not after the fact. Then I will buy whatever newsletter, advisory service, asset management service, whatever you have to offer."

Well folks, such is the genesis of this blog. From here onwards I shall be keeping you posted on the expected twists and turns in Indian equity market. You will also get to know what Dow is doing and what is expected ahead from Dow. I shall be posting clear trading opportunities as they present themselves. These opportunities can be grabbed to take Stock/Index Futures positions. So wait for my next post to enrich yourself. Cheerio!