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Graveyard in the Sky- Trampled!

September 7, 2009

NIFTY closed at 2009 high of 4804.10, up 2.3 pc in a broad market rally, again led by the midcap and the small cap index.

I think we have just moved from the “Today” phase to “Tomorrow” phase as outlined in this post (“Watching the Tape”).I would recommend you to read my last blog post (“State of The Markets”) to inject a healthy sense of cynicism.

Of course, the “Today” phase has ended a bit sooner than my taste, but then the market really doesnt care of what I think or do.

You know, how do you recognise a financial bubble? A bubble pricked in one geographical market, doesnt affect another in a different market. You just know, its a bubble. I was extremely cautious seeing the state of Shanghai Stock Exchange in the past one week. Yet what we did was make a new 2009 high. Does it remind you of something? It reminds me of something. And it reminds me of subprime crisis, decoupling talk, September of 2007. Lets admit it we have run up too high, too fast at a pace too giddy even for adrenaline junkies. In my previous blog post, I was cautious, really cautious. But I neednt have been at that time. Because crashes dont occur from consolidating markets. But now that we have moved decisively into a new market regime, the threats and opportunities have doubled up. At one end we have new highs being made in our domestic indices and at the other we are seeing a lack of momentum taking a toll on other international indices. If you ask me, what I intend to make out of it, is this: SSI rallies on to make a lower top compared to July tops, SPX goes all out in a blaze of glory yet with a fading momentum, and NIFTY keeps trapping the retailers, with its honey laced siren song. Only to have the leading indicators like social mood  on the street called money lane to top out!

Today as I move on, I am not an optimistic bull, but a very cautious one, ready to change my stripes to a bear anytime I see an uncanny euphoria. I would suggest you to do the same and not forget markets run on doubts not on euphoria. Be long, stay long in this market, expose yourself to ETFs, they are far better, cheaper and transparent than mutual funds and use this last run up to make it all up, for tomorrow who knows…

Adios!
Soham

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