Jai Bala | Market Correction: Jai Bala when we will see the next major market correction

“Chemicals, logistics and cement can be positioned from a short-term perspective, but from an investment perspective we just have to use this move very close to record highs to ease and get into cash positions,” he says Jai Balachief market technician, Cashthechaos.com


What will you pursue when we surpass 18,500? Where to from there?
The Indian market slightly outperforms the world markets. This is unsustainable in my opinion, but what markets will do in the extremely short term is that it will drop very close to, or slightly surpass, the record highs registered in October 2021. Then the markets will initiate a major correction.

So there are two possibilities in it; one approaches record highs and another slightly exceeds them and then falls off. So this is basically not a sustained uptrend and is likely to top very close to record highs or slightly above record highs.


If the lead in the banking space continues, the banking index is up 1.7% today while the Nifty is fairly flat. what does that tell you
The path of least resistance for the banking index is higher. There’s no doubt about that at the moment, but if you look at the momentum charts, bank stocks are losing momentum, but as long as the bank index stays above 39,250, it’s pretty safe. There are two key stocks here; one is and the other is ICICI.

As long as SBI stays above Rs 530 and

remains above Rs 870-880, the index remains safe. Once the turnaround for these two stocks begins below these levels, this will be the reason for the indices to drop. So watch out while these two stocks are pivotal to the sector. As long as they stay above these key levels, one can stay in the sector for a long time.

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Many of our technical experts have talked about the power of and. Don’t they look interesting to you?
Most bank names have recovered quite a bit and it’s quite late. That’s the only reason I don’t talk about it, and the structure for SBI and ICICI is pretty obvious and related to those two. The rest of the packs are underperformers on a relative scale. Given that the industry leaders are nearing a point of exhaustion, I wouldn’t be too keen on the other names out there.

What is your outlook on the IT index? We saw how some of these stocks performed in today’s Wednesday session. It was a nationwide sell off, although the recovery has now started. Do you see banks and IT in a similar way?
When it comes to IT I’m optimistic in the medium term, but it might be a little detrimental to work with. It’s not entirely clear if it will build above the 26,100 registered in July or slightly surpass it and then start to make medium-term bottoms.

I am bullish on the IT sector in the medium term as long as the index stays above 24,400. If it falls below that, I’ll have to revise that medium-term up move and probably postpone it to Q1 2023, but as things stand now it’s still going through a baseline pattern and until that changes I’m not too optimistic about the IT space from a short-term perspective.

What do you think of the whole cement pack? All counters are up between 10% and 20%. Likes etc are up 20-25% in the last week. What do the chart checks suggest?
The sector is looking fairly positive and is likely to outperform even if the market starts to correct. I like Birla Corp within the range and am bullish on the medium term.

From a short-term perspective

and have already moved. So I would just take that out of the equation because the risk return from that point on at 635 isn’t that attractive for as it’s up 2.5% today. The industry looks quite positive.

Since you follow global indicators fairly closely, what’s your take on the dollar index and the crude oil index?
The Dollar Index is poised for a consolidation and it’s not entirely clear that the Euro is saying that the Dollar Index is really for a corrective consolidation above 104; but the yen has crossed it, and that means there’s likely to be a slightly higher high left for the dollar index. But whatever the correction that will either start above the already started 110 level, this is just a short-term correction.

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The dollar index is likely heading towards 120 in the medium term and 138 in the very long term, say over three years. So don’t get too excited about the dollar’s decline. It has a very strong structure in the medium to long term.

What is the outlook for the levels you track in the metals index? Would you agree that metals present a good buying opportunity at current levels?
Refined metals, in my opinion it’s just a relief rally, but a sizeable relief rally and it’s been doing quite well and it’s quite late to take action there. But when it comes to international precious metals, I’m mildly bullish on gold and silver in the near term. Silver is likely somewhere near 21.5 and Gold near 1850, but that’s really a short-term view. If the precious metals come into this zone, it may provide better clarity as to whether this is a medium-term move or just a short-term move.

What would be your strategy now? Would you advise looking towards the high beta area in the near term or positioning for this somewhat mid to long term low beta time frame?
You have to be very selective here. It might even be a good time to diversify your investment portfolio. You don’t have to go 100% cash, but start cashing up to a certain level and choose sectors pretty wisely.

We think cement looks quite attractive at current levels. Even the logistics sector is looking pretty good, as are selective stocks in chemicals. So chemicals, logistics and cement can be positioned short term but from an investment perspective we just have to take advantage of this move very close to record highs to relax and build cash positions.

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