DEATH OF THE BULL, Events that lead to it!!

Hello Everyone,

The objective of this thread is to piece together all the small/major, local/international, events that took place and those that are believed to have caused the DEATH OF THE BULL.

I request all the members to give their inputs so that after a good many posts, we can prepare a time line of the events, which could serve as a handbook to look out for future (similar) events.

Also once the time line is done, we could have a discussion or a healthy debate, if we have enough participation.

Regards

Murtaza Mohsin

Many renowned Technical Analysts make a common mistake like all of us.
They tend to forget that a countries Economical Health is more or less reflected in their capital Mkt Indices.
Upto this OK.
Then we forget that Indices are LEADING INDICATORS,and they Lead by 1-2 Qtrs ahead than what the general Economy is going to show us in FUTURE.
Though most of us use a terminology that everything is DISCOUNTED in Price,but we use that terminolgy simply without understanding the CONCEPTUAL part.
The Indices tells us early about what the Economy is going to reflect afterwards.
In Jan'08 how many Economists where aware what is going to happen in June'08.In June'08 when our Indices where even below Jan'08 Lows how many Economists could say that GDP is going to be below 7%.
As TAnalyst we should have known that what is going to happen .This aspect is coined as 'Discounting by Price'.
Many a times we hear that Price is going to climb the 'Walls of Worries',actually that means the Price going up NOW would be reflected in General fundamentals improvement in COMING Qtrs.
Hence we also fall into the trap of making post-mortems after being Hit by the Avalanche,rather we are better equipped to decipher info into knowledge well before others.
Now plz allow me to make an astrological type prediction.
As per the Indice's Price journey/destination this can be reasonably envisaged the saga is going to terminate below or around 2000 of Nifty sometimes in Feb,after that we can get a glimpse that Indian Economy is going to show us a turn around which the world will come to know in Aug'09.

Isn't this a reflection of how the smart money interprets the macros?

If everybody went by Buy/Sell signals* on the charts then there wouldn't ever be any change of trend. Someone has to act to CREATE those signals.

Even the signals are actually late manisfestations as inertia causes mkts to continue in the prevailing direction for sometime before reversing This is when the smart money reverses positions, buying/selling from/to the stupid money.

So the assertion that TA tells you everything is also incorrect imo.

Regards
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* & there too timeframes can be a bone of contention. If you go by the daily some sagacious soul will point out that such-&-such has not happened in the Weekly so the time has not come & when all pivot highs/lows etc have been taken out on the Weekly someone will cry foul pointing to the monthly & so on ...

Its a very concise critique of TA. The point that we forget that all systems are based on certain fundamental assumptions as axiomatic. There are many more factors than a system could accomodate, simplification being the highest priority. When system fails to explain an event we call it a breakdown. While asish da's point that market precedes events in a sense that it predicts what happens in future, this perception by itself is based on synthetic outcome of majority of individual perceptions and their action.So while economy may show better performance at a later date, inertial perception would prevent us to forsee the future development, thereby contradicting the main axiom of the system put by Asish da. The time lag in change in perception and action of majority and economy's impact on changed perception would create a gap, when TA would indicate sell and smart money would be moving in. Same could be observed at the peak of bull market.I am not sure how many were really pessimistic about continued momentum in Dec 2007 and Jan 2008.All TA would indicate buy and smart money was moving out.

Creating signals is easy for those who operate at 60% of market turnover such as FIIs.So the moment they go on buying spree all sentiments would turn. This way they can also lay the trap for gullible traders as retail investors may not move in ( being dumb money) at this stage.

pk

Asish da, Kkseal and pkjha,


very nice inputs.


so, my take away is, smart money moves in/out around 2-3 months before the turnaround/breakdown of uptrend of the economy, TA will Lead by 1-2 Qtrs ahead than what the general Economy is going to show us in FUTURE.

we, not being smart money, because we don't have wherewithal to do extensive research, may lag the smart money by one qtr., but will lead the dumb money by atleast a quarter.

BTW, Rakesh Junjunwala said, he started buying in oct fall itself. so, can we call him smart money?

correct me if my understanding is wrong.

Hi everyone

Very nice inputs and strong points put in by uasish, kkseal and pkjha.

The very first objective of starting this thread was to determine exactly what those Macro/Leading Indicators are that one should keep a watch for.

And yes smart money takes advantage of the inertia, as put in by kkseal, to make an exit/entry while the general public are still optmistic/pessimistic. Thus again highlighting the purpose of this thread to figure out what exactly the smart money knew.

As per pkjhas's theory, FII's and DII's do have some kind of control in creating signals. But even these fellows were equally optimistic near the top. FII's till late have been sellers. I think smart money is the not the majority but the very few minority who have a sense of what to look out for and again this is the thread's purpose.

Charts do provide a sense of what is to come. It is just about interpreting what one sees. I agree no one or may be very TA's of FA's cried foul about the events prior to the JAN'08 debacle, but knowing is one thing and calling the shots is another. Very few would have thought of challenging the kind of optimism that prevailed then.

If an of the members here do practice TA, I suggest you re-look the price chart with a very common indicator as the RSI and you would see that the price and the indicator were contradicting each other.

I guess what ever kind of analysis one follows, eventually what happens is emotions (greed/fear) takes over rational understanding, and this is why I felt starting a thread to figure out what exactly one should have focused on and should do in the future to 'foresee' a similar kind of situation.

I wish and hope more members would participate and give their valuable inputs and suggestions.

Regards