First of all look at the 50 week Moving average of nifty for past 5 years and you will find that Nifty has never closed about 1% below it crossed around 1800 levels in 2003, that was the start of primary bull market. On friday we have closed well below 50 week moving average of 4975, pretty important signal.
Between 14 May 2004 to 16 July 2004. You obviously were not around during the sensex crash on 17th may 04 when the UPA took over and the left party started talking crap about communism, end of disinvestment and death sentence to stock market speculators (ok, this one is a bit stretched, but would have probably gone to that extent) etc?
http://img295.imageshack.us/img295/4454/niftymovavgzc0.png
You will also notice that a close below the 50 week MA marked the end of the decline in 2004, and several instances in the past. So your hypothesis about "a fall below 50week MA by more than 1% having predictive power" is invalid.
Secondly though not exactly clear at the moment but Nifty has formed a lower pivot high at 5500 and is about to break the pivot low of 4430 on weekly charts, once we get a confirmation of lower pivot low then it would be clearly a downtrend and it would be foolish to take long positions.
I do not understand one point. Why is it that people talk about a decline as if it is the end of the world?
If this is the definition of a bear market:
A market condition in which the prices of securities are falling or are expected to fall.
Then saying the market is in a bear turn after it has fallen by 30% is futile, because it is historical information and serves no predictive purpose. Saying, let's wait for a confirmation of nifty tanking by another 10% is pretty comical, because after it has tanked by 10%, you cannot profit from the information you have (had).
If you say it is a bear market because the market is expected to fall more, by how much and why?
