Monday, November 28, 2016

The market is going down

It's certainly been a long time since the last blog post. Long term investing sure is fun if you like watching paint dry. Luckily for me dear readers, it turns out that I actually do like watching paint dry. And its all the more fun if the paint company in question happens to be a sizable chunk of your portfolio! If you are Indian or invest in the Indian stock market, no prizes for guessing which is this paint company!

Anyway, in the last blog post, written on 31st July, I had commented about the negative divergences appearing in the Indian stock market. Here's a copy of the chart that I had posted last time.

Well, the prediction has played out perfectly and the market has fallen a good 10% from its highs. And here's how the index looks currently.

Pat pat. That was me patting my back. But seriously dear readers, I have to admit here that I didn't expect the market to fall this much. Same why like I didn't expect Donald Trump to be the leader of the free world. Same way like I didn't expect 500 and 1000 rupees currency notes to be banned in India. I guess my predicting abilities do have their limitations. So much for the pats on the back.

Anyway, the same negative divergences pattern is now appearing in MACD in S&P. 

Is the market headed for a fall? I think so. 
When will this fall happen? No clue. Your guess is as good as mine.
How much will it fall? I can give you the next support levels but so can any guy with crayons who can drawn horizontal lines and trend lines.

Come to think of it, I can't tell you much. But what I can tell you, and luckily for me, it turns out that this is the most important thing in investing, is that how I will react and what my reaction is going to be when the market falls. There are very few things that you and I can predict, and even fewer things that we can control, but we certainly have control over how we respond to these events. Do you have a game plan ready for when/if the markets fall 10% from here?

You can follow me on twitter for latest blog updates. Also, here is the link for free subscription to the blog.