Markets at the Top or at the begining of a new Bull Run

The markets have run up and we has the best January in many years to log in a monthly gain of 9.2%. Does this mean the entire bear market is over or where do we stand? Lets try and explore.

1. We had assumed the current up move was counter to the fall from 5400 to 4532. The Fibo retracements came to 4863, 4966 and 5068. We can say this is a fresh up move only above 5226 which is also 200 DMA.

2.The falling trend line from 6339 joining all the tops also comes at around 5150-5200 and the 200 EMA at 5130. If we are able to surpass all these we can say a fresh bull market is upon us.

3. The markets in many of the bear markets come and test the 200 EMA and DMA. The attached image gives us a good idea of it. Sustaining above the 200 averages is a good sign to go long.

4. Many of the indicators are overbought and at least a retracement of the up move is possible. Supports come in at 4860, 4798 and 4735. We are back into positional shorts only below 4638 and positional longs above 5226.

5. Looking at the RSI indicator, this is the top of the indicator range if its a bear market rally. Above this we go into newer territory.

6. The RIL results came and disappointed and I would not read too much into the buy back. The last buy back about 7 years ago led to very little stock being bought from the open market.

7. RBI credit policy is on Tuesday and no CRR cut will lead to a fall as a CRR cut has been priced into the current prices.

8. The FIIs have been relentlessly buying in the month of Jan. They have bought close to 1 billion USD. Only a reversal of these inflows can lead to markets turning down.

Since we are closer to the top end of the range, prudence would be to stay out of the markets as a short term correction will be healthy.One can always re-enter above 5226.
Those interested in mid caps and large cap ideas, there is always Lakshmi's mid cap ideas and Cherry Picks.