“Buy the rumor, sell the fact’ goes the maxim in the stock market. A Nifty rally that started in June 2024 on the expectation of an imminent Fed rate cut, and one that survived assassinations, pager and walkie-talkie explosions, and belligerent political rhetoric in West Asia to deliver 23% returns in a matter of 3 months appears to have come to an end just after the Fed announced a larger than expected rate cut. Since then, the correction in the last 10 days has wiped out all the gains made in the entire month of September and the price now stands right at the low of the previous month – a key support level.

For all the trading sessions but one in this month, the market opened higher and closed lower, signaling unrelenting selling pressure.

To be fair, the market is still in a higher high and higher low (HHHL) structure meaning the market is still trading up, it is precariously close to breaking the previous lower high made exactly a month ago at 24,748.50. The price has also settled below the 50 DMA, which is now offering a firm resistance. If this level is breached, and the price settles decisively below it, we could say that the HHHL structure is now broken and we are looking at volatile consolidation at best or a new lower high, lower low (LHLL) structure i.e. price trending down.

And there are good reasons to worry about such a deeper correction. Foreign investors, lured once again by China’s unprecedented economic stimulus are continuing to pull money out of India. It is expected that Q2 FY25 will see slowest earnings in 17 quarters (or first time since the pandemic hit in 2020), inevitably leading to analyst downgrades. The jobs and CPI data coming out of US only today indicating a weaker than expected US economy with still stubborn inflation. Throw in the mix Israel and Iran that are still threatening to light the Middle East on fire, knife-edge elections in the US and key states of Maharashtra and Jharkhand next month….

The bears patiently waiting on the sidelines for months must be itching to pounce.