Is the Phase 3 of the Bear Market near ?

Marking the Bear Market Phases . . .



As per the Dow Theory (relating to Technical Analysis) Bull Markets and Bear markets have three phases. You will find a somewhat detailed discussion on this in the Indian context on Page no. 37 of my book.

Since July 2007 (a year back), while explaining the Dow Theory , I have been indicating to the participants of my workshops that , at that time, we were nearing the last phase of the Bull market characterized by extremely high retail participation.

More recently, after the Jan 08 crash, I was again suggesting to the participants that the first phase of the bear market seems to have started which should be followed in subsequent months by a deterioration of the fundamentals. In the ensuing months we did see economic and corporate fundamentals weaken- lower profits, slowdown, rising inflation, crude oil et al.

I presume we are currently in the second phase of the bear market which may still last some more weeks before the Phase 3 starts.

I have tried to mark the phases of the bear market on the Nifty chart – though it may not be too accurate in terms of time. I presume the ‘H & S’ pattern on the Nifty / Sensex and it’s subsequent violation of the neckline , is only further validating that we are about to enter the phase three in the coming weeks.

My belief that -‘Prices tell you more about the future than Annual reports’ is getting stronger!

All of you ….Fasten your seat belts !

CA Rajiv D Khatlawala