K.S. Badri Narayanan
Chennai, Oct. 17 Though the Bombay Stock Exchange's benchmark index, Sensex, took 20 years to scale 10,000, the journey from 10K to 20K was undertaken in record time. It took 483 trading sessions for the benchmark to move from 10,000 to 20,000; but when the reversal happened, the Sensex crashed from 20,873.33 (closing high registered on February 7, 2008) to 9,975.35 in just 193 days.
Slogans such as "India Shining", "India Growing", "foreign investors showing confidence in India", "emerging countries are going to be world leaders" accompanied the sharp surge in stock prices as the benchmark crossed one milestone after another. These cheers gave way to the more circumspect "technical reasons are behind the market's decline", "FIIs are pulling out of India", "India growth story is intact," and so on.
Investors' WoesThe sharp decline since the beginning of this year has dragged more than 60 per cent of the stocks listed on the National Stock Exchange almost 75 per cent below their January peaks.
"The unprecedented and the most undesirable event eventually materialised as the Sensex hit new lows of sub-10,000 levels. It has been a journey of utmost despair and dismay for investors with the Sensex collapsing over 50 per cent from its highs in a matter of just 9 months. However, this carnage has to be looked at as not an India-specific issue but an issue that has clouded equities as an asset class," said Mr Hitesh Agarwal, Head of Research, Angel Broking.
Loss RealisationA dealer with Mumbai-based listed brokerage house said: "The beauty of the bear market is that one only realises that he or she is in bear market after losing the entire trading capital."
"While it would be difficult to catch the bottom of the markets, we would like to re-iterate that investors should continue investing into equities in a systematic manner. The current situation would take some time to mend. If history is any guide to investments, equities have outperformed all asset classes over the long term and we remain confident that history will repeat itself," added Mr Agarwal.
Hi Friends,
A nice explanation of greed , fear,optimism and trader psychology,Go through the following Article which explains about the 5 wave structure of OIL with corresponding events unfolding.
Read it and try to recollect what was going through your mind during that phase of oil bull run:).
Three months ago, you couldn't swing a baseball bat in a crowd without hitting someone screaming that the world was running out of oil.
But after reaching a record high of $147 a barrel in July, oil fell as low as $68.57 (on October 16 -- Ed.) – a 50% decline. Before oil slipped below $70, "Goldman Sachs, among those predicting $200 a barrel oil, cut its year-end forecast of oil to $70…" (AP)
How could have "those predicting $200 a barrel oil" gotten it so wrong?
"To be fair, there is always a tendency in parts of the analyst community to look at short-turn trends and assume it’s something that will continue in perpetuity,” commented on the situation an analyst with the International Energy Agency.
Exactly. Isn't projecting short-term trends into infinity the definition of every financial bubble?
Avoiding such predicaments is precisely what Elliott wave analysis helps you accomplish. A study of market psychology, the Wave Principle helps you find psychological extremes in market charts – and then, ideally, forecast a change in trend before it occurs. A priceless advantage, indeed.
Here's how Elliott wave analysis could have helped you navigate around the oil bubble. On June 4, 2008 – still a month before oil's all-time high – Steve Hochberg, editor of Elliott Wave International's Mn-Wd-Fri Short Term Update posted this chart
Later, on August 11, 2008, The Short Term Update wrote:
Oil is down 23% from its July high. [This] chart was published in the June issue of The Elliott Wave Financial Forecast and shows our call for a top. Prices traced out five waves from the December 1998 low and carried to just above the upper line of an unorthodox parallel trend channel. Optimism was at near-record levels and the president of OPEC stated (shortly thereafter) that, “prices won’t come down.” It was a very strong confluence of conditions that indicated a reversal.
Near term, prices have closed lower the past two days, which is interesting in that if there ever was a fundamental “reason” for oil to shoot higher, it is Russia’s invasion of Georgia. I believe that they even shut down a pipeline. When psychology reaches an extreme and the trend turns, all the supposed reasons pundits cited as to why prices were rising matter little. Nearly all were rationalizations to begin with, and the change in psychology exposes their flaws.
And that brings us to today. Here's an update on that oil chart from the June 2008 Elliott Wave Financial Forecast:
Now that oil has dropped 48% from its July peak – into the forecast area of "the previous fourth wave" – we may see market sentiment reach a low extreme. What will that mean for oil going forward?
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