The March Reversal

INVESTORS – 1 month term expectations

INVESTORS – 6 months term expectations

EXPERTS – 1 month term expectations

EXPERTS – 6 months term expectations

Confidence in achieving personal targets on BSE over the next 6 Months

STOCKS VS CASH – Current amount invested in stocks (% from total available)

source: prognosis.ro
The March Reversal – 14 Mar 2011
We are in March, which marks a 24 month anniversary for the bull market that started in 2009. Though there is no rule that says that after 24 months prices should correct for atleast a few weeks. But markets continue to point to multi week exhaustion before we restart the next leg of the bullish trend.
We anticipated the March reversal 2009. One reason why 2010 was a low return year was also because of the March reversal. Now we are in 2011 March.
The history of BETFI and March has a good accountability. Barring Mar 2004, all the other 9 march reversals delivered in terms of a reversal in trend or atleast a few months of pause. Pauses from a previous continuing trend are also considered a reversal.
Now that we are in March again, the previous trend should reverse. The previous trend since May 2010 has been flat and stagnating. Above this RSR readings are at bullish extreme both on monthly and half yearly readings, a topping sign. Even momentum readings are also overstretched.
We continue to look at a market pause or negativity from current levels for atleast a few weeks before sentiment and the bulls reemerge.
Is the fall over? – 10 Feb 2011
After the fall comes bottoming and bottoming can take weeks and maybe months. Accumulation is different from buying. It’s a slow buying process, where you wait for a price to come and you generally don’t run after the price. When do we accumulate? We can accumulate when prices are bottoming, as bottoming process can be long and may take a few weeks to few months. We also accumulate because we see value that we are willing to hold for longer term of 12 months to 36 months.
Now before we accumulate, the question to ask is whether the fall is over? RSR readings have not swung to the other extreme, so there seems to be more left on the negative side. We expect the readings to bottom sometime in or after March. As we move into spring, the sentiment might be at an extreme low and create real low and attractive value.
However, sector rotation suggests that some stocks and sectors might already have reached their bottom values and selected stock picking should begin. Our favorite stocks are Condmag, TLV and BRD.
Time to Fall – 10 Jan 2011
“You might say, Mukul for one time, at least make us happy. Tell us everything is good and worst is behind us.”
Our job at Prognosis and Orpheus is to be objective, even if you call us incorrigible contrarians. And above this we are following clearly defined rules. When RSR is at the top we sell and vice versa. Now the RSR has reached historical all time highs on monthly and 6 monthly readings. Even the confidence Index is heading to a new high. This has never happened.
So even if our larger secular view remains intact, these are not the prices one should enter. Whether markets fall for a few weeks or a few months, the correction should create opportunities to accumulate for long term, but not now we are looking lower.
There is another reason RSR reading are valid, sensitive and sharp. Just like RSR is suggesting a sentiment top, volatility Indicator VIX is suggesting the same, an extreme complacency. We have a consensus on VIX and RSR and that says “It’s Time for Equity to Fall”.
Let’s See.