India: Final Capitulation underway, Bottom forming

Finally, Global and Indian equity markets are capitulating.  Of course, the news continues to be full of new problems:
Problems in Russia
Debt crisis in Europe
Are markets warning of US Default

And yesterday I 'posted' the trashing of India by all the mighty developed country investment houses...Merrill Lynch, Goldman Sachs, Credit Suisse,...

you get the picture.

I cannot imagine that anyone believes what Merrill Lynch, Credit Suisse or Goldman Sachs prints or says anymore..we know they only talk their positions.  They have not been able to save themselves from their own machinations.  Imagine their effect on your money.

All the advisors are really traders; and all traders talk their positions.  If you believe the 'free' advise these bums provide then the outcome is well deserved.

Today, November 12, 2008 I have concluded that a bottoming is forming in India.  This may go on for another 2 or 3 months...and we may see another 15 to 20% downside...but my most reliable indicator is the percentage of talking heads/investment houses/business magazines/talking heads that are pessimistic on the markets.  I call this the Advisor Sentiment percentage.

I have always treated free advise from the broad media and the specialist houses as my special Advance/Decline line...when they say Advance, I Decline.

As of this weekend, the Advisor sentiment percentage has broken down decisively and says that 'Final Capitulation' is underway in India..and perhaps globally.  It is possible some new conflict or situation will arise that causes me to re-assess...but I would say we are now in the 15% down and 45% up pay-off range over the next twelve months.

So, I have put 5% of capital to work at Nifty 2820 level.  While I continue to be wary of Real Estate, Banking and IT for now I have bought Nifty (the broad market per se).  As this market declines, I will increase the allocation. The despondency and depression stage is upon us...it takes enormous energy to be cheerful during these times.

This is when character is tested...Equity markets are like marathons....not the 100 meter dash.

Below is the typical 'nattering nabobs' comment now...on the way up these talking heads did not need to make sense as long as they said 'buy'...now, they do not need to make sense as long as they say 'sell'.  Puts me in a downright cheerful mood.

Q: Assuming that we start somewhere around 2,900, can you still initiate a trade this morning or would you wait to see if those 2,850 kind of levels of last week are holding or not?

A: No. There is only one trade today and that is to go short. So a trader could go short at any level inside this trading range or even outside or below it with a proper money management method: keep a stop. My suggestion was earlier also and now too that the stops had to be wide enough to take care of intra-day volatility. The direction is more or less very clear it is on the downside.