Held at point blank!!!

Yes, pretty much held at point blank for predicting that the markets are to fall. I will give my explanations, why markets might fall - before that an example to prove that people see what they want to see.

Following were my predictions in my previous blogs:
1. Just when everyone was expecting a correction in the Indian/US markets, I told there would be a sucker rally, followed by a correction, which would likely start in the 3rd week or 4th week of September.
2. Just before US markets took off, I posted the charts as to what the US markets might likely do.

Everyone now is asking me why aren't the markets falling - You told markets will fall now!!!! If markets were to listen to what I would say, I would not be working as a software designer. Ohh, b/w I'm OK for constructive criticism but certainly not here for useless taunts :-).

I like to keep things short and to the point:
1. Knowing the direction of the market [the process of predicting the market] is like an "Open book exam". Just by having the text book next to you during the exam does not guarantee you >=95% marks. Just knowing the direction of the market is useless, unless you have a strategy to squeeze the maximum from the markets.

2. If anybody had entered during the sucker rally, they would have made hell lot of profit. When the whole world was worried about US double dip, I said Dow Jones might hit 10900, it is just 40 points away from this target - WHY AREN'T PEOPLE SEEING THESE THINGS :(.

3. A smart person can make money in markets irrespective of the market situation - and so does not have to enter on dips and sell at a higher price. The fact that experienced people in the market are against this is that it is the easiest way to loose money for new comers.

4. And at-last - I would be happy to be wrong a few times, it's a nice humbling experience. If I can learn something from each of my mistakes, I can live with the mistakes and it would be too arrogant of me to expect to be right always with markets.

OK, enough of egoistic talks, now to my reasons for the markets to fall:

1. Whenever the price touches the bollinger bands [I use "21" as the period], it either goes sideways, or hits the other side of the band.

2. Whenever there is a breakout/breakdown, we look for two things for a reversal in the daily charts. Firstly, a Doji and secondly a close below/above the previous bar. This is a signal of reversal. We have had a "Doji" on NF and BNF. Now waiting patiently for a close below any of the previous bars.

3. FIIs have a net buy of  17K+ crores - highest since 2006 [http://www.moneycontrol.com/stocks/marketstats/fii_dii_activity/index.php]. A similar thing happened last year - in september 2009, FIIs had a net buy of 13K+ crores. And the following month there was a fast and deep correction. A very high likelyhood this time. All those people who want to invest - this is the last oppurtunity until next January [2011] or April/May[2011].

4. FIIs are investing in the Exchange Traded Funds, which is usually bought by the hot money. This hot money is extremely liquid. It can go out "ANYTIME".

On the other hand markets might go sideways without correcting, make a new high and then correct sharply. Otherwise in all likelyhood we should resume the uptrend in late October or early November and rally until Jan/Feb before a pause. We have now entered a range of high volatility, an amazing time for intraday traders :-).

-Sri