Hitesh portfolio

Hi Hitesh,
I understand you don’t try to time the market &are always fully invested.
I agree entirely that timing the market is futile & have missed a few rallies in the past.
My post is only for educational purposes since I happened to read William J o’Neil’s “How to Make Money in Stocks”. & co-incidentally observed a few things from his Section on the Market direction, which seem to be aligning with the current market.
Observations with respect to the books are as follows-
Market Direction (downtrend)

1. Distribution- Focus on 4 to 5 indices (daily price/volume action) that cover most of the market. However, if the observations are true to even 1 index, should be considered good enough evidence to take action.
   Things to observe-
   i. On one of the days in the uptrend, volume for the market as whole will increase from the day before, but the index itself will show stalling action (a significantly smaller price increase for the day compared with the prior day’s much larger price increase). Heavy volume without a further price increase. The average does not have to close down, however, in most cases, it will.

ii. The market comes into distribution when it is advancing. That is why very few people recognize it|
iii. Normal liquidation near the market peak will usually occur on three to six specific days over a period of four or five weeks.
iv. More accurately the distribution days of four days over two to three weeks are enough. However, this can be up to 6 weeks if the market attempts to rally back.

Currently, I see all of this holds true. (Picture below)

Observations-
1st Distribution day can be seen on 12th July, during the market advance, followed by 2nd, 3rd & 4th, within three weeks. Which should be enough to make the conclusion.
However 5th and 6th distribution is also visible further.

2. Rally Attempts after initial decline.
   There can be feeble rally attempts. Currently, we can see for many days the market has been opening positively however over the end of the day, it either makes negligible gains or trends marginally negative.

3. Other Clues as per the book-
   Leading stocks (e.g. Britannia, HUL) have stalled & are trading below their 10-year PE, while shady companies like (e.g. Suzlon/India Bulls Housing/Moreoen Labs) are making spectacular gains.
   Recent buys in one’s PF are not moving much in either direction.

Personal observations on Indices disparity (not from the book)
Small Cap/Mid Cap indices are trending higher, irrespective of their larger peers like Nifty50/Nifty Bank. We understand from the Mutual Fund industry there is euphoria in small and Mid-caps currently. I personally see people churning completely from other caps to small caps MFs because of the spectacular gains they can see.

Would you be kind enough to share your thoughts.