If you thought the DJI was overvalued, have a look at the India50. This thing has outperformed loads of other stock indices, even rivalling the Brazilian Bovespa. They've certainly passed the moon. Could the next stop be Mars?
Well I think a significant correction is well overdue. Of course, I don't know when that might happen. The show could start with a 5 to 15 min trend south. So, I'm all eyes on this one. The recent pump in the last 2 days was mainly about the DJI pump. Oh yes, markets around the world draw confidence from the DJI, as misplaced as that is.
So now we have one air market filling up on air from another market. That's looking for trouble.
Attacking this for a short means I'm setting up alerts for 5 to 15 min trends south. It's already heavily bullish. I don't like going long at the top of markets. Strange things tend to happen there.
Disclaimers: This is not advice or encouragement to trade securities on live accounts. Chart positions shown are not suggestions. No predictions and no guarantees supplied or implied. Heavy losses can be expected if trading live accounts. Any previous advantageous performance shown in other scenarios, is not indicative of future performance. If you make decisions based on opinion expressed here or on my profile and you lose your money, kindly sue yourself.
This market will correct a bit but structurally very bullish long term. The rise is based on the Budget 2021 - India will be a 5 trillion economy by 2026-27 so expect markets to double by then. BTW most of the rise is based on foreign investors piling in given the markets before the pandemic crash had a torrid time for 3 years.
Captain_Walker
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@amirkhan_235, Interesting stuff. I know loads of countries and stock pickers/investors are looking towards a time beyond COVID-19. Who are these people? Some are not even people. They're organisations with big money. None of them has an answer to GDP - which has plunged to worse than the total of two world wars several times over.
There is more evidence that powerful investors are simply playing into the markets like a casino. They have the power and big money to pump.
There is more solid evidence that the pump in both the IN50, DJI, S&P and NASDAQ was about increased liquidity coming from various routes through central bank monetary policy - aka QE infinity. Cheap money (low interest rates), and the FED (or other central banks) having their backs meant they could pump with confidence.
It's rather amusing that I've not been able to find (over the last 6 months) a robust assessment in why investment in the stock markets is likely to deliver on earnings or dividends projected 3 to 5 years ahead. Stock indicies are not the economy, and they don't truly represent the health of Nations' economies (unless your name is 'Donald Trump').
The deal is basically like this, 'put your money now and you'll get back 10 times as much in 5 years' - the central bank has your back. It's that sort of confidence pushed into the so-called investors that has them throwing money in. If you're at a casino where the house is on your side, sure throw as much money on the table as you like. Central banks have no way of giving any sound guarantees about the future of economies over the next 5 years. Even the FED has warned investors that they should be cautious in their projections and COVID-19 is likely to be a challenge for a long time.
At this time nobody really knows if the vaccines are a solution to COVID-19. This virus is mutating and being given more opportunities to mutate into more dangerous strains. Have investors factored that into their equations for India and other countries? I haven't seen it. If anyone has, please share a link.
At the moment economies are on 'life-support' of QE infinity. Theoretically that could continue forever. Yes - because nothing in law prohibits them from printing up and distributing by helicopter. Take stimulus cheques in America, there is a fight about whether it should be more or less than $1400. But when I look into this, I can't find whether that's a once off payment or a regular payment on a monthly basis. I don't like CNBC but from what they say, it appears that these are intermittent adhoc sums of money, that won't go a long way. But markets have did some rallies on news of this? For what? It's not going to make a massive difference to economies or to people, or to GDP. The market moves on these sorts of news was basically a greed frenzy divorced from reality.
Few people are even focusing on unemployment anymore. Instead everybody is look past 2022 to 'the new utopia'! When reality meets fantasy, there is pain!
dmedin
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@Captain_Walker, COVID19 is a farce, the survival rate among under 65s is 99.98%
Captain_Walker
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@dmedin, Importantly survival rates or death rates are not the major issue. Your political masters feeding nonsense into BigMedia have propagated an idea that death rates a some sort of target to bring down. The more they, the media and people repeat that the more in becomes a 'truth'. That sort of truth is well encapsulated in the term 'post truth'. The book 'Post Truth' by Lee McIntyre is a mind-blowing read on how delusion is created. The audiobook is best. I think it's essential reading for all traders - though it has nothing to do with trading per se.
Say what - delusion is what drives markets north - more north than south. So one has to respect the power of delusion. Our masters have sold so-called investors a dream (aka delusion) and it's working just the way it was orchestrated to work.
Reality may struggle to catch up with delusion - but the longer delusion prevails the harder will be reality's punishment. But guess who will suffer most? Poor people. The rich folk will make money whatever happens and stash it away. Did you see that there was a boom in private island sales? What's that about? It's about the super-rich - not the average 'rich' - taking their money and 'self-isolating' in luxury.
The 'love of money' - which is really the greed for money - has made our society very sick. No virus required.
amirkhan_235
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@Captain_Walker, There always has been pain endured and markets have swung from lows but eventually they get higher - which is why markets are at all time highs since they began. Yes, there are market cycles but in the long run they are too interlinked into global livelihoods (pension funds etc) for any government or central bank to mess around with which is why bailouts and QE began- as disconnected as they seem from reality, there is only one way in the long run - going up! Crashes will always exist and recoveries will be much stronger...which is why the saying goes - invest for long term, don't try and time markets....
PS - you are also looking at things in a fundamental economic theory way - all that has long changed since Central banks pumping money in.
Captain_Walker
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@amirkhan_235, I agree that fundamental analysis is usually wrong. I have no robust set of data to do a fundamental analysis anyway. I've also explored technical pictures in this market in other posts.
An important technical issue that's not to be ignored (not that you do so), is that when everybody is shouting 'to the moon', that's probably a time to sell. And when they're screaming 'blood on the streets', that's when to buy (go long).
My thoughts on this market rely on the degree of disconnection from reality. What I mean is, that I always expect technical pictures to stretch well beyond what fundamentals might inform us are possible.
Before the COVID crash, same time last year, everybody knew that the market was overbought. The re-inflation doesn't really hide that reality (which is both technical and fundamental). There is nothing new in terms of tangible underlying economic health to base the recovery on. I infer that if it was bad in Jan 2019, it must be several times worse around now. I won't go into some of the figures, because that will take me back into fundamental analysis.
The technical picture shows that the market is overbought. There are fundamental reasons why that has happened, but I don't go there - else I'll be talking about QE infinity again. The recent technical moves are about greed, misplaced optimism and hope that vaccines will save the world and move us on to a new utopia.
I don't think there should be a 'who wins' in technical/fundamental exchange of views (not that you imply that).
My opinion having looked at the overall movement of the DJI for the last 11 years is that the so-called crash last year is just round one. I can only suspect that round two is coming. Based on analyses of those who know more than me, there is expectation for a major correction that will probably dwarf what we saw in 2019. I'm not in a position to say when that may happen. It could be tomorrow or a long time from tomorrow. (Expectation is a word signifying probability - which is not a prediction).
amirkhan_235
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@Captain_Walker, Agreed, it is overbought and will sell off and come back up again - even higher - you either trade 3-4 times in that range or just take 1 trade for the long term... entering now is probably not the best idea but all depends what your aiming for - if its retirement a consistent monthly contribution across 20 years will always bring wealth.
Captain_Walker
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@amirkhan_235, Great stuff. I can't see the future as well as others do.