Is the rally sustainable???

Now with the rally in place and most of the people already forgetting the lows of March and October, things have started to look better. People are no longer talking about the markets heading lower, everyone is now talking about the recovery and how market might cross 3500 & possibly 4000. Well with due respect to all most people had started to talk about 2500 and then 2000 for the nifty when the markets were heading lower. The fact is that it is practically impossible to predict the markets when they are not in a trend shift phase. The trend shifting phase happened when the markets crossed 2800-2900 it was an easier call to take then that the markets would be seeing some good upmoves.

So where do we go from here? Currently we are in an uptrend, however the force of the uptrend has been diminished. We will remain in this uptrend until we go down below 3100. . .

A couple of pointers from my side why one should have some cash in hand.

1) There are down days when the markets have almost given up on most of the stocks, and stocks are available at crazy down valuations. These are the days when one employs the cash the return can be almost 100% within a very small period of time.

2) Indian election results, are a big factor that markets are awaiting. No one knows how the markets will behave after that. We all know that markets dont like instability.

3) Some stocks in the course of recovery have far outshot the correct price that they should command specially considering that the results are not expected to be great. Hence fair value is important.

4) Markets usually do not end the bear market in a V shape recovery. This is exactly what is happening, whereas actual results on the ground are getting worse!

So I think having some cash is the order of the day. If one is invested in the market then its nice to enjoy the upmove, with some stop losses in place. Its nice to take some profit off the table once in a while. Wait for the off days and if the markets change course again then wait for the real off days to enter the markets to gain some multi baggers. . .