The Great Bull Run: The (seemingly) never ending marathon!

Markets are up! Markets are down!

The RBI cuts the Repo rate….markets move up!

Analysts expect a correction in the markets…but the markets move up again!

Nifty and Sensex hit all time highs…surely, a correction must occur?

Markets move up again!  “A correction is expected”. Markets move up, yet again!

What the heck is going on?

If you read the news looking for an answer as to why the markets are surging upwards….you will not find one.

Sure, you will find opinions. One analyst will claim that the Repo Rate cut has still not been totally factored into the markets yet (which is true)

Another analyst will say that a correction is bound to happen at some time (a very vague statement, but also true)

And finally- an analyst will say that we can expect the markets to continue surging up, forever and ever…unfortunately, this is not true. (but it makes for a great headline)

The truth: a mania is in the air

In times of euphoria,  mania sets into place. You can think of mania as nothing more than a herd effect. There is no rational explanation for it; it just happens. And when it happens, you capitalize on it and look to make money.

There is usually a trigger that sets a mania off. It can be as trivial as a GDP figure beating its forecast by 0.1%. In this case, the RBI’s Repo Rate cut is what set it off.

In truth, a 25 basis point cut should not cause such a rally in the markets. Any economist will say that this is nothing more than irrational exuberance.

But to you- the retail investor and trader- the economist’s words have no place in your trading decisions.

You are looking to buy. Because when everybody is buying, you buy. With a landmark Budget in place, there is absolutely no reason for you to not be bullish in the markets.

The Trend is your Friend. 

Cheers,
RKSV

Raghu Kumar

Raghu Kumar

Raghu loves trading, algorithms, and figuring out ways to beat the market. He enjoys workouts, naps, food, listening to Carnatic music, teaching his dogs (pug named Zenzi and Shih Tzu named Cactus) cool tricks, and spending time with family and friends.A list of his authored articles on NDTV Profit can be found at http://profit.ndtv.com/topic/rksv

  • Guest

    Batman approved.

    • Want to get your buddy Robin to approve it too? 🙂

  • Guest

    As per tradeacademy lecture which stated that markets broadly have three phases and after going through this post, I infer markets are in maniac phase. (Am I right?). But with my (little) knowledge of TA. I do not see any reversal pattern building on any timescale (yet)? Is there any you see? It has been 3 months since the post was published.

    • Hi there!

      It would be difficult to describe the current conditions as being in a mania phase; the markets have only gone up 4% since the start of the year. There’s no tangible reason, as of now, to expect the markets to not trend upward. Yesterday’s repo rate decision shows that the RBI is in no rush to cut rates further, which is a good sign! The markets reacted positively as soon as the decision was announced.

      We hope you enjoyed the Trade Academy course!

      Cheers.

      • Guest

        I have two doubts
        1. How is the number 4 a measure of non arrival of maniac phase yet. At what growth rate does the market grow generally so that one can attribute it to the starting of maniac phase
        2. Why did you measure the growth of the markets from the starting of year? Shouldn’t the % growth be calculated from the end of the last stage rather than starting of an year to arrive at such conclusion?

        Regards

  • Nagendra Singh Bhati

    Systematic trend(Momentum) following is required to make money in the markets. Cut short losses & let the profit run.