INDIA:SHARE MARKET TECHNICAL TREND: 30% FALL SURE TO HAPPEN SOON

If historical trends are any indication, then the current stock market rally that started in March 2009, has perhaps run up too much and too fast. Today's chart of the day helps put this in proper light. If one were to consider stock market rallies on the Sensex since 1993, then no other rally has run up so much in such a short time as the current rally. It should be noted that a rally is defined as a move of 20% or more without being interrupted by a correction of 20%.

Thus, if the current rally has to find a place along the trend line in the chart, the stock markets will have to undergo some degree of correction in the short term. It should be noted that a correction of 30% from the current levels should place the current rally nicely along the trend line. Alternatively, if the markets go nowhere for the next 7-8 months, the current rally will again tend to fall in line with the trend line. Either ways, this is not good news for stock market investors wanting to invest at the current juncture.

However, investors take this chart as a gospel truth at their own risk! It is just a technical study after all and has completely ignored fundamentals. Speaking of fundamentals, if the correction does indeed happen in the short term, it will be a good opportunity for long term investors to invest and hence, capitalize on the long term India growth story.