Friday, April 8, 2016

US Markets at Critical Juncture - What Happens Next?


US markets underwent further pain with Dow slipping 174 points in last trading session. This is serious damage to the index and has to be evaluated with full sincerity.

What does last closing in US markets indicate? Is it still safe to hold on to long positions? Let us try and get some sense of what is in store for the bulls.

Next trading session is very crucial to answering all these questions. For doing an honest analysis, let us consider the following scenarios :-
  1. In next trading session if Dow closes near 17700, then long positions are absolutely safe and 18000 in Dow will be a reality.
  2. If Dow closes near 17400, then we may see Dow slide down to 17000/17100 level. If this happens then we need to be patient and wait for a bounce. This dead cat bounce should take Dow to 17600 level where we should exit all our long positions.
  3. If Dow closes near 17600 in next trading session, then we will have to wait for another trading day for either of the above mentioned points to happen.
The nub of the situation is that we will have to exit our long positions either at 17600 or 18000 in Dow, based on movement of Dow in trading sessions ahead as enumerated in preceding paragraph. So be calm and hold your horses!