Homo Animal Irrationale ! ( Man is an Irrational Animal )

Man is an irrational animal - said Russell. How correct he was ! Look at the stock markets. Dont they exhibit irrational behaviour.?

Secondary markets taken in isolation and as a closed system is basically a zero sum game. That is, if you buy ten stocks, you make profit in five and loss in five and the ledger shows zero profit !

Now human beings, as defined by Russel, are irrational. It is human being who is responsible for the Uptide of the Dow and the Sensex. Bullish sentiment drives the market up. Look at the Sensex. It moved from 2900 to 21232 ! Now it is the Downtide.

A boom means that the economy has extended itself, and a recession becomes due in order to restore it to its original balance. During boom, all people look at the market through rose-tainted glasses, thinking that the boom will last forever. They forget that

If Spring comes, can Winter be far behind !

It is the Uptide, triggered by a good GDP, FII investment, improving forex reserves ( now at $ 300 billion ) which catapulted the Sensex to 21232 ! As per the Dow Jones Theory, higher levels cannot be sustained. Winter cannot be far behind !

During boom, all sorts of bullish news reach the market. Once recession starts, bearing news shall start pouring in. Like ICICI making a 1000 crore loss and L & T incurring a 92 crore loss. These are major scrips and well, you can imagine the investor sentiment on hearing these news. Added to such news are the subprime crisis in the US, the US economy moving towards recession & the oil price almost $ 110 per barrel !

So, let us face it, we are now witnessing a Downtide. The market is sentimental, not fundamental. Irrational beings drove the Sensex upto 21232 ! Let us see to which level they will pull the Sensex down !

The Dow Jones Theory states that the Primary Movement is all important. The Impulse Phase is now bearish. People make money during the Impulse Phase and lose it during the Corrective Phase.

Our advice is to lie low, and take the 9% bank interest. This is not the ideal time to invest in the Shock Market !