When markets are in strong uptrend - bulls generally defend 50 dma. Why 50 dma? - Because it is keenly followed by institutions and big money managers who manage large sum of money.
It’s first real test of the argument - there is large sum of money waiting on sidelines. If that money doesn’t come at 50 dma - then there was no such money. It was all figment of imagination.
Remember, if market fails to hold 50 dma - it’s first sign of big trouble ahead because it opens the market up for deeper and longer decline.
Currently, there is selling across the board in Global markets with no exception. Though most of the global markets have penetrated 50 dma - there is still hope that market will rebound. But I would say - this is not the time to be brave. Keep your eyes open to all possibilities.
Do you know which is the most important chart to watch now? Well, let us look at all global charts -
S&P 500 = Slipped below 50 dma: Bad sign
Last time S&P 500 bounced strongly from 50 dma - this time - it hasn’t.
Source: Stockcharts
Brazil: One of the strong market - back to 50 dma.
Brazil has been one of the strong markets of last 6 months. It has just been on one way ride but are things about to change? It depends - whether it holds 50 dma or not.
Source: Stockcharts
Nifty = Not getting enough buying support near 50 dma: Bulls nervous?
Yesterday, Nifty had a nervous day around 50 dma. Bulls lack conviction at support - never a good sign
Source: Stockcharts
The Big Story: Is it the unwinding of Long Risky asset + Short Dollar trade?
If the answer is yes, then expect a big bang much deeper decline because liquidity can get sucked out in a very meaningful way. Keep an eye on USD chart - it is still below 50 dma. But if USD continues to strengthen and inches above 77.5/50 dma - it might be all over for all equities in near term. The surprise element itself can pull the market down in a very big way.
Source: Stockcharts
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