Bear is coming !!

Stock Markets round the world are rallying and Sensex is no where behind. Currently Sensex to a large extent follow the US markets, which is in its late bull phase as follows:

1. There has been 17 interest rate rises each of 0.25% till June 06. This is a long and extensive interest rate hike when compare with the previous business cycles. High interest rate is a standard feature of late bull phase in business cycles.
2. Unemployment rate is going down steadily although not reaching full employment yet. Low unemployment rate is also a feature of late bull phase.
3. Commodity price has risen extensively in the past one year. Because booming economy and production, the demand for raw materials tightens. This is a typical feature of late bull phase which usually extend into the bear phase.
4. Inflation signals start to beep. This force the FED to increase interest rate to dampen inflation at the expense of economic growth which might induce bear market. Inflation is a lagging indicator, and is a good signal for bear market.
5. During the regular interest rate rises like the first 15 rate hike, each rise have small impact on the stock market, but the recent response to interest hike is very violent, but this is also a late bull phase features.

That means that Sensex might also go along with Bears and the chart below pretty much confirms that.
Below is a trend chart for Sensex, Ideally the Indice should be within the green lines and any deviations indicate a strong rally which often proceeds with strong bear runs. Again I would not elaborate on the chart and leave it on readers discretion :)

Notes:
1) Red line does not represent actual trend but is representation of forecast.
2) Month of Dec is based on my prejudices and not on any mathematical model.


BSE : SENSEX