[Nitin Bhatia]

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Is it possible to analyze a stock market crash in advance? This question is troubling a lot of investors after the stock market fell 4900 points from 12400 to 7500. In this video, I will share the data points, technical setups, and systems, etc which were signaling the upcoming fall in the stock market.

1. The short positions were increasing continuously from Dec’19. It reached alarming revel of 2 lakh thus a very big deviation between the long and short positions in index futures. It signaled a big fall. Also, the derivatives positions are speculative positions.

2. On the moving average setup, the nifty index was testing the 20 EMA, 50 EMA, and 200 EMA again & again. The moving average act as a support and resistance for the stock. If any stock or index re-test the support or resistance more than two times then the probability to break the same is 99%.

3. Nifty was in a distribution phase for almost 5 months. The longer the distribution phase, the bigger the fall. The volume analysis was also suggesting a bearish sentiments i.e. index was increasing but the volume was decreasing which is strong bearish sentiment.

4. The double bearish divergence on the nifty indicated a strong bearish sentiment. On the heavyweight stock like Reliance, there was a triple divergence.

5. The momentum indicator like RSI or Relative Strength Index was also not supporting the up move in the nifty.

6. The 80% stocks on the BSE were in RED when the Sensex was at a peak. It was pointing towards index management. Also, the advance to decline ratio in Feb’19 suggested an upcoming sharp decline in the index.

7. The divergence between the GDP growth and nifty was pointing overvaluation of the index.

8. The return on equity was highlighting that the earnings of the listed companies are consistently falling thus the market is overvalued.

9. In Jan’20, the returns of the small and mid-cap were in -ve for 2 years. The market was supported by a handful of large-cap companies and backtesting suggests that after small and mid-cap stock, the large-cap stocks fall sharply.

10. The forward price earning of nifty 50 was 18.6 which is very near to its all-time high of 19 thus the index was overvalued. The 10 year average of nifty 50 forward price earning is 15.5.

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