Sell in May and Go Away

Well, I was having an overall bearish view in the markets since the beginning of April 2010 after Nifty hit that 5398 on 8th. Since then, Nifty was only moving with a negative bias and closed the month at 5262 some 2% off the highs, which theoritically is nothing but we need to look into with a broader perspective. For the past many days, we have seen the broader market underperforming or rather the unknown small caps oe what one calls 'kachra' stocks zooming 10-20% a day. Sometimes this continues for quite a decent period but then generally that calls for a short term intermediate correction or otherwise the large caps need to push in the accelerator to break past the market resistances. Now, my view is that we are poised for a steep correction may 15-20%........

Now I had already presented many reasons for my bearish views in the last couple of articles. Still have a look a the following chart.....

This clearly suggests....

1. SST (Saptarshi Swing Trade) generating a fresh SELL signal on 30th April.

2. Nifty Futures creating a Doji after 2 days relief bounceback due to April series expiry....

3. The parallel channel still exists with NF hitting the upper band and moving towards the lower end of the channel.

4. Currently, just holding above the 34ema in a critical situation. With Dow closing in deep red and SGX Nifty trading at 5231 suggests that 34ema should get broken on Monday morning. But then I shouldnot be speculating on that fact before it actually happens.

5. Also PCR moved from 1.34 in the morning to 1.07 in late Friday trading. And this volatility has been observed in the past many trading sessions indicating some nervousness.

6. On a fundamental side, the Greek and the Euro issue coupled with some other small small triggers may be a good enough reason for some unwindings of long position in the US markets, which otherwise have been quite resillient to any bad news. But then, this is just an assumption...

and finally,

The month of May has been quite an eventful month in the history of Indian Markets. Either it zoomed up 10% or fell 10% on most occassions. Like last year we all know the 20% upper circuit and again who forgot May 2006 when it crashed like anything. Now history suggests that its almost a 1 yr - 1yr pattern or a 2 yr - 1 yr alternate pattern. So whatever the outcome be, one should be cautious enough to avoid getting stuck in the wrong side. Last year, I suggested a Buy in May but...........

This year my theory is "Sell in May and Go Away".....
As for an advice, I would suggest to be on cash as much as possible.....

Happy trading !!!