Timing the Market

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???????????? When I began investing in the stock market 18 years ago, I was a financial illiterate, but I understood that if I did not jump in, I would never learn the practical aspects, as I realized that theory was quite different from reality. I did read a few books on the fundamental as well as technical aspects of investing. I was working then, so it was more of a hobby but gradually it became more of a passion as I realized its immense potential of changing my life by giving me a second career after retirement.

?????????? My real learning came from the bear market crash of 2008. I was lucky enough to take most of the profits off the table just three days before the crash which happened on 11/01/2008, when I heard Shankar Sharma on CNBC TV 18 sounding very bearish. But I was also foolish enough to jump right back soon after. That is when my learning zillathon started and it has not ended yet.

???????? One year later, it was providence again that led me to attend a proper technical analysis course and I was introduced to my first “Trading System”, which included a “stop loss”. But I was not a trader. I was an investor, so I did away with the stop loss in my system. I was introduced to “Metastock” software program on which I started honing my skills “on the end of day” charts.

?????? ??Most people feel that technical analysis is a day trading and F&O tool. It is, but it can be an investor’s ally too. Even so, I was still not making the kind of progress that I wanted. Then I came across the Eliot Wave Theory and read a book on it. What amazed me was that it was based on the Fibonacci number sequence, a purely mathematical tool and all the technical tools are based on mathematics and statistics.

??????????? So, when some columnists on ET Wealth & other TV channels write & speak about technical analysis as “not science”, I wondered where that was coming from. ?People should understand that price charts do not always reflect the underlying market conditions because they can get distorted disproportionately by manmade excesses or natural disasters which are unpredictable even by the few having foresight. However, price charts superimposed with technical tools do warn you about an approaching unpredictable event, so that you can take most of your profits off the table.

?????????? Atul Suri who is a technical and fundamental analyst made an interesting concluding comment on one of the business channels a few months back. If I paraphrase, he said something like “if everything appears so good, why is the price of oil so low?”. So, that made me more cautious. Does it mean an approaching recession in the world, which was being accelerated by climate change and faster adoption of EV?? Something else, like central governments across the world including RBI is buying gold in bulk. Is that only to de-dollarize or are they seeing something which I am not?

???????????? In any case, I was not waiting to see it happen. So, I took all the profits off the table and am patiently waiting for the markets to bottom out, when I can reenter.

??????????? We are in the fourth leg of the market super cycle which began on 06/03/2009, the second and fourth being corrections. That also means that we are still in a bull trend, with a fifth (uptrend) coming. So there is no need to panic. If you are sitting on losses, you have only to wait patiently and “average down” when the trend turns up. Most “experts” will tell you to never average down but I have made most of my profits averaging down, even as a rookie investor. Now, whenever I am wrong footed by the market and believe me you will, because nobody can beat the market, all the time. Your only strategy is to average down and wait for the trend to turn up. That way, you will always beat the market. However, be certain to buy fundamentally “sound” stocks and not “penny” stocks, where you may end up averaging down endlessly and which may or may not give you a profitable exit.

????????????? How do you select a “sound” stock”? I suggest you read Saurabh Mukherjea”s book on “Unusual Billionaires” and get that insight. I have modified his inputs and included it in my first filter and ever since my profits have doubled.

??????????? What level are we looking at next? The down side has just started and generally 50% of the previous leg is retraced. That should take the Nifty down to about 20,718 or thereabouts. On 09/01/25, it closed at 23,526.50 which is down but the trend will get confirmed only when the Nifty closes below the previous low of 23,263.15. On the other hand this downtrend will get negated if the Nifty were to close above the previous high of 24,857.75. So, it appears ominous that the Nifty is pretty near to breaking lower. The good news is that the fifth leg of this bull market, as per the Fibonacci projections should take us to, believe it or not, 28,500.

????????? ?I suggest you watch Jai Bala’s u-tube videos, watch ET Now, CNBC TV18/Awaaz, Zee Business& read ET on a regular basis and finally get at least trained in Technical Analysis, even online. ?But do not believe whatever you read or hear, even from me, because I have been wrong in the past & I could be wrong again. ?Always do your own research, you will make mistakes but try to learn from them and improve the processes in your system. You should never violate what data is suggesting through the processes in your system and be patient enough to wait till all the processes in your system flash green and then too buy only up to 50% of the surplus you have (distributing this between 10- 15 stocks only) and keeping 50% in a Liquid Fund, for deployment only when the uptrend resumption is confirmed. If you follow this stringent regimen you will do fine.

???????? Happy Hunting!!

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