Nifty is Bullish

•The Nifty has come out the range of 5700 to 6100
•A number of other patterns and studies in various timeframes are showing a bullish upmove for the nifty
•Western, European and Asian Indices all continue to be in uptrends so the global scenario is conducive for an upmove
•FIIs have been buying for the last few days so that is a positive sign
It is highly probable that the early months of 2011 should prove extremely strong for the market. Have a great yaer ahead!

Nifty 6080 key level for short term trend

6080-6100 is a key zone for short term traders in Nifty. A move above this should see significant short covering and also fresh longs being initiated. Watch this zone to see if the current uptrend in the Nifty is to sustain.

Myiris interviews - Advisor Interview

Myiris interviews - Advisor Interview

Twitter-Based Hedge Fund Claiming 87.6% Accuracy Set To Launch

London-based Derwent Capital Markets says the social-networking system is better at gauging market sentiment than just about anything else. In particular, use of “calm” motional words on Twitter, properly analyzed, lets the firm predict where the Dow Jones Industrial Average is going in the next two to six days with a remarkable 87.6%accuracy.

The entire story can be read here:
http://www.finalternatives.com/node/15021

Nifty Update

• Nifty has come out of the narrow range from 5880 to 5960..so the short term direction is UP
• We seem to be coming out of the larger range of 5700 to 6100…
• If you analyse the market from a Dow theory point of view we are still in a bull market…we have made a pattern of higher tops and higher bottoms. The last significant bottom was 5350 and now in this November crash a new higher bottom of 5700 has been made.
• Western, European and Asian Indices all continue to be in uptrends so the global scenario is conducive for an upmove
• If you put all these things together it is likely that the correction we saw in November was a pullback and the uptrend should resume.
• There is a strong probability that we cross lifetime highs of 6350 and once we cross that a 10% upmove from there is likely

Nifty sideways and rangebound

Overall the Nifty could be rangebound between 5700 to 6200…this is a sideways kind of market. It'svery difficult to say which way the market will move till we come out of this range. 5727 was the low we reached on 26 november so if that is taken out further bearish for the short term.

FIIs are selling which of course needs to be watched very closely.

5400-5500 should prove to be a strong support which is also the region of the 200 day MA

Keep an eye on Copper

Gold and Silver are in well established uptrends. For those who missed the trend keep an eye on Copper. As shown in the chart above Copper has overcome a key resistance which has contained prices many times in the past 5-6 years. If this breakout were to hold Copper could be the next trending commodity.

Nifty short term trend is down

Short term trend in Nifty is down. We have broken 5950 which was an important support zone for the last couple of months. We are near 50 day MA so it is expected to be volatile here. There is a massive fight going on between bulls and bears. Short term traders can short at 5950 with 6050 as SL and target of 5500. The Dollar Index may be in for an upmove which could result in equities in India heading downwards.

5950 key support

For the short term 5950 is a key support zone for Nifty Futures. A move below this could spell further weakness for the market.

The longer term bull run is still intact as long as we don't break below 5350.

The region between 5350 and 5950 is fairly large and we might end up somewhere in between fairly quick if the bears take charge. The next few days are going to be very interesting!

Copper attempting a major breakout

The above chart shows HG Copper continuous on the Comex. It is attempting to breakout above serious overhead resistance. 4.05 which has contained its price several times in the last 5 years. A breakout above these levels should some serious movement in the price of Copper.

Crude Oil - breaking out of range?

Crude oil has closed above stiff resistance around 3875 levels on MCX. A definitive close above 3875 for the next few days is very bullish for crude which has been rangebound for the last 15-18 months. Keep an eye on these levels closely.

QE2 & Commodities bubble

A good article on how QE2 might cause a bubble in commodities

http://www.reuters.com/article/idUSTRE6A42S820101105

Commodities Update - MCX, NCDEX

Media Appearance for Monday 8 November:

830am - NDTV Profit
1230pm - Bloomberg UTV

Please tune in if you are around.

There has been a lot of talk around gold, silver recently so this would be a good time to give an update on Commodities.

All metals including Gold, Silver, Copper, Lead, Aluminium, Nickel are bullish and in uptrends. How long the party lasts remains to be seen but as of now it is safe to remain long in Metals.

In agri space Mentha Oil, Crude palm Oil, Chilli and Rapeseed are in uptrends.

QE2 should have a positive impact on Equity and Commodity markets globally so commodities is an interesting space to be invested in.

Dollar Index on a clear downtrend

The Dollar Index is in a clear downtrend.

The 50 day EMA is below the 200 day EMA. It has been making a pattern of lower tops and lower bottoms on the daily charts.

If we see the weekly charts (as shown above) the Dollar Index has broken through a major trendline support.

This has major bearish implications for the Dollar Index in the coming weeks/months.

Nifty bullish

Nifty has been rangebound between 5950 and 6180 on the upside for the last few weeks. It has crossed 6180 (Nifty Futures) today intraday. This is bullish. Its a very high probability that we should see lifetime high soon. The street is waiting for the Fed announcement on QE2. Hopefully it should be positive and the bull run should continue. The Euphoria around Coal India, Diwali and also sustained FII buying are all positive and unless there is some adverse news from the Fed we should see Nifty at a lifetime high soon.

Nifty Futures - 5950 key support

5950-5970 is a very key support zone for Nifty Futures. Going below that would imply short term weakness for the market. It would set off a pattern of lower tops and lower bottoms for the short term. Keep a close watch on this zone.

Also yesterday FIIs sold approx 950cr in the cash market. Keep watching FII activity closely.

DAX, SP500 - Bullish

The DAX has broken key resistance of 6390. It is bullish. Most western and Asian Indices are bullish currently. The bulls seem to have taken control for the time being.



The SP500 is also bullish and needs to conquer 1225 which is the next major resistance.

Nifty short term trend is down

Short term trend on the Nifty is down. We have broken the trendline that started from 5352 on 31 Aug 2010 to a high of 6286 on 14 October. 5950-60 on Nifty spot is an important support. Below that we can see a 50% correction of the upmove from 5350 to 6286 which is roughly around 5750

• Globally All western indices are bullish on an uptrend. SP500 has resistance at 1220 and support at 1040. Dow Jones has resistance at 11235 and support at 9950
Russia, Brazil, FTSE, CAC, DAX, Taiwan, Shanghai is bullish

• Dollar index seems to have taken support at 76, its got support below that at 74, needs to cross 83 to confirm it is in an uptrend. Currently it is bearish.

• We continue to remain bullish on the Nifty. The longer term bull market is intact. We are still in a pattern of higher tops and higher bottoms in the long term. If we go below 5350 that would get violated.

May 6 Flash Crash & High Frequency Trading

"At 2:32 p.m., a trader at Waddell & Reed placed a huge order to sell E-mini futures contracts, which mimic movements in the S&P 500-stock index. This kind of trade wasn't unusual for Waddell, which at the time managed some $25 billion, including the popular Ivy Asset Strategy Fund. As part of the fund's strategy, the firm from time-to-time places bets that the broad stock market will fall as a hedge against its individual stock holdings.

Also not unusual was that Waddell placed the trade using a computer program known as a trading "algorithm" designed to stand in for a human trader and parse out buying or selling based on different variables. Generally, traders opt for algorithms that consider trading volume, price changes and the amount of time to complete a trade.

But Waddell's desk opted for an algorithm designed to sell 75,000 E-mini contracts at a pace that would range up to 9% of trading volume—and not take into account other factors. The report details how a similar-size trade earlier in 2010 took five hours to execute, but in this case, the Waddell trade unloaded on the market in just 20 minutes.

As the Waddell trade hit the futures markets, the joint report said, the likely buyers included high-frequency trading firms. A key feature of high-frequency trading firms is that they quickly exit trades and, by 2:41, they were also aggressively selling the E-mini contracts they had bought from Waddell, which was still trying to sell the remainder of its contracts.

Meanwhile, long-term buyers were out of the market in the midst of the selloff.

"HFTs began to quickly buy and then resell contracts to each other—generating a 'hot-potato' volume effect as the same positions were passed rapidly back and forth," the report says. At one point, HFTs traded more than 27,000 contracts in just 14 seconds—a huge amount.

The Waddell algorithm responded to the high volume by picking up the pace of its selling, even though stocks were spiraling lower.

This feedback loop of selling by Waddell, high-frequency traders and others helped drive the E-mini price down 3% in just four minutes."


The entire article can be read here:


http://online.wsj.com/article/SB10001424052748704029304575526390131916792.html?mod=rss_whats_news_us_business&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Fxml%2Frss%2F3_7014+%28WSJ.com%3A+US+Business%29&utm_content=Google+International

Nifty Update

Overall trend is UP on the Nifty. Charts are bullish

Short term the range is between 5950 and 6100. A move outside this range will decide the next direction of the market for the short term.

FIIs continue to pump in money.

S&P500 Update

The S&P 500 has broken out above 1130 which is a key resistance and has stopped the progress of the S&P500 twice in the past. Short covering by the bears will move the index higher but if this rally has any lasting strength the bulls need to step in with some buying.

The next few days/weeks would be interesting to see how the situation pans out with the S&P500.

Nifty 5900 and beyond

Charts are extremely bullish, it’s a quiet bull market with low volatility. VIX is currently around 18 levels. We continue to remain bullish on the Nifty. Nifty is now rewarding investors for their patience after a long rangebound period. There is no resistance till 6350. FIIs continue to pump in money. Retail has started entering and will do so increasingly as the rally progresses.

Looking forward to Nifty 6350 and higher.

Watch the FII inflow

FIIs have pumped in 7700 cr in June, 8300 cr in July, 7200 cr in August and 7000 cr in Sept till date. We have analysed FII inflows/outflows since the time data is available and the market movements clearly rise and fall along with the FII inflows and outflows. More on this later - but for the time being FIIs are pumping in money in a big way and as long as that trend continues the Nifty is headed in one direction - upwards!

Stay long or be wrong!

Its a bull market...current momentum, breadth is very strong. Retail hasn't participated yet so they will throw in the towel and join now. Very high probability of huge moves in the Nifty now. Enjoy the ride!

Market update

Overall trend is UP. Markets are looking very strong. Charts are bullish.
FIIs continue to pump in money, High probability that we see an explosive move upwards.

Auto, banking, consumer durables, OMC look extremely bullish.
Telecom (Bharti Airtel and Idea) and metals (Hindalco & Jindal Steel & Power) have given fresh buy signals and can be the next potential outperforming sectors.

Market Update

The trend remains UP. There is a high probability that Nifty sees new highs once we break above 5550.

Auto, Banking, IT, Consumer Durables remain bullish
Telecom and Real Estate have just turned bullish
Metals has the potential of turning bullish in the near term.
ADAG continues to underperform.

Changes in Nifty

Following are the changes being made in the Nifty

Stocks going out: ABB, Idea, Unitech
Stocks coming in: Bajaj Auto, Dr Reddy, Sesa Goa

This could be bullish for the stocks coming in as a lot of ETF and Index Funds would have to buy them...Keep a watch on these counters

Nifty Update

The Nifty has closed above 5400 today. Its an important breakout from the 4785 to 5400 range and confirms the bull move as Nifty is continuing to make a pattern of higher tops and higher bottoms. If 5400 holds we should see fresh highs in the Nifty in the coming days, weeks.

SP500 breaks 1040 - downtrend still alive

The SP500 broke the 1040 resistance yesterday. Whether this is a deadcat bounce or the bears waiting to catch breath, time will tell. However for the current bearish trend of lower tops and lower bottoms to change we need to break above 1130. Till then the trend is clearly bearish - with both a death cross (50 day moving average crossing below 200 day moving average) and a pattern of lower tops and lower bottoms in place.

Dow Jones - Fibonacci Retracement

The Dow has stopped at the 61.8% Fibonacci Retracement of the fall from October 2007 till March 2009. Its a very high probbility trade that we head much lower from here.

Gold as an investment

Everybody is long in Gold these days. We keep hearing stories about how people should have listened to XYZ's advise and kept accumulating gold. The above chart shows if we had invested money in Gold in 1980 we would be worse off after adjusting for inflation. Buy-and-hold anybody?

The Real Mega-Bears

This chart from D-short shows the inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.

This chart shows real (inflation-adjusted) analysis of long-term market behavior. The nominal all-time high in the index occurred in October 2007, but when we adjust for inflation, the "real" all-time high for the S&P 500 occurred in March 2000.

The entire post can be read here:
http://dshort.com/charts/mega-bear-2000-comparisons.html?mega-bear-2000-extended

Dow Theorist Richard Russell: Sell Everything, You Won't Recognize America By The End Of The Year

Richard Russell, the famous writer of the Dow Theory Letters, has a chilling line in today's note:

Do your friends a favor. Tell them to "batten down the hatches" because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, "How the dickens does Russell know -- who told him?" Tell them the stock market told him.

The entire story can be read here:

http://finance.yahoo.com/tech-ticker/dow-theorist-richard-russell-sell-everything-liquid-487564.html?tickers=dia,spy,xlf,%5Edji,%5Egspc,%5Eixic

Market Update

China had a high of 6144 in October 2007 and had crashed to 5100 before India crashed on 21 Jan. Levels reached in Oct 2009 were 1650
Currently at 2350 levels.

India crashed from 6300 to 2250 and is currently at 5250.

S&P has broken a crucial level of 1040. 1040 has served as support 4 times in the past. Broken low of 2 February so started pattern of lower tops and lower bottoms.

It is quite possible China is again a leader for a global selloff. Because if there is a global selloff India will not be decoupled as there will be a flight to safety from all asset classes.

So if there is a crash in India it is possible it will be a steep one like Jan 2008.
4875 is a number that needs to be maintained for the bull move to be intact.

S&P closes below 1040

The S&P500 closed below 1040 yesterday. So why is 1040 such an important number?

1040 has been tested four times since the rally which started in March 2009. A number which is so crucial a support once broken becomes a crucial resistance.

Also the charts of S&P500 are now forming a pattern of lower tops and lower bottoms which is bearish based on Classic Dow Theory.

If this 1040 level is not broken on the upside for the S&P, things could get further bearish for global indices in the coming weeks/months.

Soros: European recession next year "almost inevitable"

Europe faces almost inevitable recession next year and years of stagnation as policymakers' response to the euro zone crisis causes a downward spiral, according to billionaire investor George Soros.

Flaws built into the euro from the start had become acute, Soros told a seminar, warning that the euro crisis could have the potential to destroy the 27-nation European Union.

"The commercial paper market, for instance, in America is now refusing to lend to European banks so there is even a funding crisis and the ECB (European Central Bank) has to step in and the banks are unwilling to lend to each other," he said.

The entire post can be read here:


http://www.reuters.com/article/idUSTRE65E5K520100615?loomia_ow=t0:s0:a49:g43:r2:c0.108588:b34914706:z0

FELIX ZULAUF: THE MARCH 2009 LOW WON’T HOLD

Felix Zulauf is a respected market forecaster who has had a great last few years. Zulauf is terribly bearish and believes the debt deflation environment is far from running its course. He believes we are currently at a major turning point in the markets where investors are beginning to realize that government spending is not the solution to all our problems. He says the fiscal austerity measures will only increase deflationary pressures and that the pain is inevitable and unavoidable:

“The world is at a major crossroads. Some countries are at the end of a dead-end street. Greece has hit the wall. Spain and Hungary probably will be next. The Greek debt crisis was the beginning of markets refusing to finance irresponsible public-sector indebtedness. It will travel from the periphery to the center in coming years. The common denominator in the housing crisis, the euro crisis and the banking crisis is that industrialized economies carry too much debt. These crises show that we have to rewrite our system. We have been living a fiction for the past 20 years in order to enjoy a greater standard of living. Hard times are ahead, and the steps that Europe has announced to contain its crisis are only the beginning. Governments must cut spending and promises, such as entitlement programs, and raise taxes. At best this means stagnation for some years, but it could be much worse. Deflationary pressures will increase.”

The entire article can be read here:
http://pragcap.com/felix-zulauf-the-march-2009-low-wont-hold

Nifty breaks out of range

• We have come out of the range 4900-5200

• FIIs have been buyers for the past 7-10 days

• Nifty VIX has declined from 35 to 23…so there is less fear in the market


If traders are looking at playing the short term momentum the trend is clearly UP and they can look at going long with 5150 as SL

5398 which we reached on 7 April has to be taken out to confirm intermediate trend of higher tops and higher bottoms

5150-5200 which acted as a strong resistance should now act as a support

George Soros: Financial Crisis Entering Act Two

George Soros one of the most savvy bears around has predicted that we are entering Act II of the Bear Market.


What does Soros see that makes him so bearish? For one thing he believes that the financial crisis in Europe will worsen and attempts to cut budget deficits will push the global economy back into a recession.

According the Bank of America (BAC), Europe's debt ridden nations will need to raise 2 trillion euros within the next three years. Already the crisis has wiped out $4 trillion from global stock markets.



The entire post can be read here:

http://www.bloggingstocks.com/2010/06/11/george-soros-act-ii/

Google's Latest Launch: Its Own Trading Floor

While prop trading in wall street banks is looking at being banned other firms seem to be starting the same.

Google, it turns out, has launched a trading floor to manage its $26.5 billion in cash and short-term investments.

The entire story can be read here:
http://www.businessweek.com/magazine/content/10_23/b4181033582670.htm

Nifty Update

Volatility continues in the Nifty

We are still around the region of the 200 DMA. Its normal to be volatile around this region for a bit before the bears take charge. There is a huge fight between bulls and bears at this region. Ultimately which camp wins remains to be seen but the bias is downwards.

Globally there is a lot happening:
1. Euro continues to get hammered
2. China remains very bearish
3. Korea uncertainty
4. PIIGS joined by Hungary
5. US - The Dow has broken the psychological barrier of 10000

Market has been in this region of 4900 to 5150 and the next big explosive move is going to happen once we move out of this broad range. As mentioned earlier this morning on NDTV Profit, the bias is on the downside below 5200. Above 5200+ I would look at going long.

Housing risk in China greater than US, UK

An interview with the Financial Times by Li Daokui, who serves on the Chinese central bank’s monetary policy committee, included an uncharacteristically candid comments on the state of China’s housing market and by implication, the direction of Chinese interest rate movements. From the Financial Times:

“The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,” he said in an interview. “It is more than [just] a bubble problem.”…

The entire post can be read here:

http://www.nakedcapitalism.com/2010/06/chinese-monetary-official-housing-risk-greater-than-in-us-uk-pre-crisis.html

US subprime $2 trillion vs Europe $9 trillion debt

The European financial crisis is worse than the sub-prime crash of 2008 because the sums are so much bigger and it is governments that are in dire straits.

Mervyn King, the Bank of England Governor, summed it up best: "Dealing with a banking crisis was difficult enough," he said the other week, "but at least there were public-sector balance sheets on to which the problems could be moved. Once you move into sovereign debt, there is no answer; there's no backstop."

The sub-prime property market in the US, together with its slightly less toxic relatives, represented a $2 trillion mound of debt. The combined public and private debt of the most troubled European countries – Greece, Portugal, Spain and so on – is closer to $9 trillion.

The entire story can be read here

http://www.telegraph.co.uk/finance/comment/edmundconway/7770265/Is-Europe-heading-for-a-meltdown.html

Nifty at its volatile best

We are seeing the Nifty at its volatile best. We are still around the region of the 200 DMA. Its normal to hover around this region for a bit before the bears take charge. Also these kind of spikes are very common for a bear market. The old saying goes “ bull markets roar, bear markets spike”. Tops are built on greed and greed takes a long time to let go. Bottoms are driven by fear and so they happen fast.

FIIs are still selling in a big way. Yesterday they sold 533 cr. To put things in perspective FIIs have sold 13000 cr till now in May. This is similar to the number they sold in Nov 2007 before the crash happened in Jan 2008.

We have seen a pattern of higher tops and higher bottoms from March 2009
To me 4667 which we hit on 8 February 2010 is a very crucial level to be broken on the downside to confirm we are actually having lower bottoms. On the upside if we break 5398 which is the recent high on 7 April 2010, this move is further confirmed as we will still be aiming higher tops.

All Big Bears grow up from little Cubs

Every big Bear market has started from a minor correction. Is the current situation (little Cub) going to grow into a full blown Bear market?

Let us understand what is going on in the world:

1) China - overstimulated property market by govt, govt cutting back now
2) Europe - PIIGS in bad shape, officialy in bear market territory (20% correction from peak), Euro getting hammered against the dollar, banks in Spain failing. LIBOR rate rising

3) US - huge govt bailouts, 165 billion bailout planned for private pension funds

Technically things are very bearish. Fundamentally things are very bearish.

Let the bear market complete this corrective action. There is no point in the governments spending trillions of dollars in trying to stop the primary bear trend of the market.

Germany's 'desperate' short ban triggers capital flight to Switzerland

A year ago, Germany's financial regulator BaFin warned that the toxic debts of the country's banks would blow up "like a grenade" once hidden losses from the credit crisis caught up with them.

But the regulator's shock move on Tuesday night to stop short trading on banks, insurers, eurozone bonds – as well as a ban credit default swaps (CDS) on sovereign debt – has left markets wondering whether the slow fuse on Germany's banking system has finally detonated.
The entire story can be read here:

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7742355/Germanys-desperate-short-ban-triggers-capital-flight-to-Switzerland.html

My comments: The current situation reminds me of 2008 when Lehman etc were failing. Currently it is countries at risk of defaulting rather than banks. Banning short selling is a bad idea and ultimately will have negative effects. Right now the market is very nervous and any negative news will can immediately result in panic selling. Conversely there can be spikes as is characteristic of a bear market.

The Nifty has immediate resistance at the 200 DMA which is around 4985 levels. 5200 is a much broader resistance above which I would look at going long. On the downside 4667 is the first support.

FIIs continue to sell in May...and go away!

The market is still bearish for the short term...FIIs contine to sell in May...they have sold more than 6000 cr in May...although the market is still hovering around 5000, the global scenario is extremely weak..We can expect a panic selloff anytime in India. Going below the 200 DMA (4985 levels) in India should be a crucial level to watch out for. A selloff in the Futures market can cause a selloff in cash which can cause a further selloff in the futures market. This self - reinforcing process can cause a slide to convert to a crash something like what happened in the US on May 6.

Nifty Update

Let us take a step back and look at things from a longer timeframe based on Elliott wave analysis. The 1st wave lasted from 2003 to 2008 January which took the Nifty from 1000 to 6350. The 2nd corrective wave bottomed in October 2008 around 2250 levels. We are now part of a larger 3rd wave which should take the Nifty to 14000 in the next 4-5 years.

We have seen a pattern of higher tops and higher bottoms from March 2009
As long as we don’t break 4667 which we hit on 8 February 2010 this bull move is intact. On the upside when we break 5398 which is the recent high on 7 April 2010, this move is further confirmed and we will hit fresh highs

The 200 DMA is at 4987. If the Nifty closes below this level for 2-3 days in a row then it is a critical point as if this is broken lot of Long only players like pension funds and trusts etc will exit which could easily give a 300-400 point drop.

For the shorter timeframe, traders can go short with a Stop Loss of 5200

U.S. posts 19th straight monthly budget deficit

The United States posted an $82.69 billion deficit in April, nearly four times the $20.91 billion shortfall registered in April 2009.

The U.S. full-year deficit this year is projected at $1.5 trillion on top of a $1.4 trillion shortfall last year.

White House budget director Peter Orszag told Reuters Insider in an interview on Wednesday that the United States must tackle its deficits quickly to avoid the kind of debt crisis that hit Greece.

Some day all this debt is going to explode...Europe, US everywhere

The story can be read here:
http://www.reuters.com/article/idUSTRE64B53W20100512

Europe Debt

The real scenario in Europe - mind boggling numbers!

Diagram Source - NYT

Financial Lies

The media is full of stories about how the sell-off in the Dow was due to computer errors etc.That's the biggest set of financial lies. The market fell simply because there were no buyers - lower volumes in the last few months have been pointing towards this scenario.Its a bearish scenario now. Similar to what happened when Lehman collapsed in October 2008.

The next few weeks are going to be very exciting as we wait and watch if the bears actually take control!

Nifty testing 200 DMA

Nifty is very close to its 200 Day Moving Average aqround 4964 levels. A close below the 200 DMA for 2 or more days is a bearish sign. Let us see how the scenario unfolds.

If the bear market unfolds in India, expect to see days like last week where Dow crashed 10% intraday and CAC closed 6.4% lower in a single day.

Fannie, Freddie akin to the Greek tragedy

All trouble seems to surface together.

People seem to have forgotten about Fannie and Freddie.

The bailout of America’s failed housing finance giants is taking on Greek proportions. On Wednesday, Freddie Mac said it would tap the Treasury for another $10.6 billion after first-quarter losses. Together, Freddie and its cousin Fannie Mae have drawn $136.5 billion from Treasury’s unlimited equity line since they were seized in September 2008. The European and International Monetary Fund rescue package for Greece – one that was supposed to shock and awe international markets – comes in at the same kind of figure, around $139.7 billion.

The U.S. Treasury and Federal Reserve has spent $1.4 trillion to buy the mortgage-backed securities of both Freddie Mac and Fannie Mae

http://blogs.reuters.com/columns/2010/05/06/fannie-freddie-bailout-plays-like-greek-tragedy/

Overall the global scenario seems to be playing out like October 2008 when Lehman etc collapsed.

China, Greece and UK

We are now at a ery important juncture...China appears to be a bubble with so much of China growth dependant on housing and govt stimulus...China has corrected significantly in the last 6 months and like 2008 it might prove to be the predecessor of a crash in india

Greece has been bailed out..But the problem is if the govt cuts spending, its revenues are also going to be cut as there is lots of black money there...

If Greece defaults, most banks will be in a BIG problem and also neighbouring Euro countries...

UK is in high risk of a sovereign default....that will be BIG news..

Overall the trend is in favour of the bears now...Till we cross 5300+ on the nifty it is safe to exit longs and look at going short...

Nifty breaks down

Nifty has broken down below 5200 and 5162...this is bearish for the short term...time will tell how this move materialises...Traders can look at existing longs and remaining short as long as we are below 5300...globally things are looking weak...if this move materialises the next support is at 4850

Bubble in emerging markets?

Standard Chartered warns of a bubble in emerging markets.

Economists at Standard Chartered warned that urgent action was needed to address the potentially destabilising impact of "hot money" attracted by stronger growth and higher interest rates.

A combination of a prolonged period of low interest rates in the west and strong growth in emerging markets meant the money would continue to flow in. "The size of the flows could become more significant," he added. "There is a significant risk, even though it is a consequence of economic success."


The entire story can be read here:

http://www.guardian.co.uk/business/2010/apr/26/standard-chartered-emerging-markets-bubble-warning

Short term trend is DOWN

The short term trend is DOWN now...As long as we are below 5300 traders can remain short..

FIIs have bought every single day from Feb 26 (Budget) till yesterday...they have bought around 18000cr...yesterday they sold 755 cr...the first day of selling after Budget day

It is very interesting to watch their actions over the next few days...The Goldman Sachs scandal could be just a temporary blip...or it could be an excuse to once again trigger a flight to safety...

Now trade the S&P500 from India

Standard & Poor's Brings the S&P 500 to India

For index enthusiasts keen on diversifying and trading the US in addition to Nifty there is good news.

Standard & Poor's, the world's leading index provider, announced today that it has licensed the National Stock Exchange of India (NSE), the largest stock exchange in India, to create and list Indian Rupee-denominated futures contracts on the S&P 500 (subject to regulatory approvals).

The licensing agreement, jointly from S&P and S&P-licensee Chicago Mercantile Exchange to NSE, is part of a landmark cross-listing arrangement announced today by CME Group, the world's leading and most diverse derivatives marketplace, and NSE that covers benchmark indices for U.S. and Indian equities. The Rupee-denominated S&P 500 futures contracts will be made available on NSE via a sublicense from Standard & Poor's.

The entire details can be found here:
http://www.hedgeweek.com/2010/03/11/38506/standard-poor%E2%80%99s-brings-sp-500-india

Sensex 18000 but individual stocks?

http://economictimes.indiatimes.com/markets/stocks/market-news/Many-stocks-sectoral-indices-still-trading-below-2008-levels/articleshow/5773288.cms

Every bull market has its heroes. Although the sensex has bounced back to 18,000 levels where it was 25 months ago, there are many stocks which are still upto 60% below the levels they were 25 months ago. This story keeps on repeating itself. Retail investors never learn a lesson though.

What does a person do? Focus on the index rather than individual stocks.

Nifty takes support at 5344

Technical Analysis 101 - Resistance once broken becomes support and Support once broken becomes resistance.

5344 was a key resistance for Nifty which was broken on the 5th April. Today nifty corrected Intraday and stopped exactly at 5344!

This is a key level to watch out for should the uptrend be sustained

Sensex claims 18000 intraday, FIIs pump 15K cr in March

The uptrend continues as Sensex crossed the psychological 18,000 mark intraday earlier today. FIIs continue pumping money daily since the budget. They have pumped nearly 15,000 cr in March 2010. They have also put in 1134 cr in 3 trading days in April. So far in 2010 their combined input has been + 5605 cr till March.

To put things in perspective they pumped 24,133 cr in the entire 2009, with April and May 2009 being the first positive months in the year which also saw the Nifty jump from 2700 levels to 4700 levels. DIIs pumped in +26000 cr in the same time period.

FIIs removed 101,000 cr from the market in 2008 while DIIs pumped in 73,000 cr in the same time period

So these are big numbers we are talking about. Let's see if the FII inflow continues and we see the bullish trend to continue in the coming weeks/months.

Nifty close above 5344 bullish

Nifty crossing and closing above 5344 is a bullish sign. 5344 is the intraday high reached on 29 March 2010. So keep a watchout for 5344 and above

Nifty still dancing near 5300

Nifty is still hovering near 5300...the trend is UP and the probability is there of Nifty breaking 5300...this would be confirmed if it closes above 5300 for 2 days...lot of new longs will be initiated and we can see 5450-5500 soon then

VIX is low...FIIs are still pumping in huge money...cheap capital is still finding its way into the markets...you must dance while the music is on!!

Nifty trend is up...5300 key level now

Nifty is on an uptrend...5300 is a key level to watch out for....if Nifty closes above 5300-5320 levels there will be fresh longs initiated from institutional players...so its very interesting how the movement pans out..if we cross 5300 comfortably 5500 is an immediate target on the upside

US-China currency clash

China is resisting America's demands to revalue the yuan. America is threatening to punish China if it does not revalue the yuan. The Senate is trying to pass a legislation that would lead to duties on Chinese products.

Basically If the yuan floats, it is estimated that the U.S. will be able to have a huge growth in exports, which will help boost it's economy, and save millions of jobs.

This would create huge damage to China. America's stock market could shoot up, and China's stock market could crash.

So keep an eye on the debate this week.

Meanwhile the trend in the Nifty is UP...enjoy the ride...

The entire story could be read here:
http://www.cnbc.com/id/36009781

Don't fight the trend...Dow is bullish again!

Dow Theory states: If shares of industrial companies are hitting fresh highs at the same time as shares of the transportation companies that deliver those goods , it signals that the market's upward move is healthy.

The Dow has been a laggard for several months and is one of the last indexes to hit a new high. [The NYSE Composite also hit a new high last week].

The shift to the bull camp — after the Dow Jones industrial average has already climbed 65% from its March 9, 2009, bear market low — occurred this week when the Dow took out its previous bull market high attained on Jan. 19. The new high for the industrials follows a new high notched a week earlier by the Dow Jones transportation average — a key confirmation signal, according to the century-old Dow Theory.

Nifty continues its uptrend...it will be interesting to see how long and how far it continues.

FII vs DII

The graph gives an idea of what the FIIs and DIIs have been doing since the budget.

FII’s have injected nearly Rs 11000 crores into Indian stock markets since Budget day the 26th Feb 2010. However domestic institutional investors (DII) money is going out of the market in the same period of time. Almost 5400 crore have been pumped out by DIIs in the same period.

FII/DII activity is a very key area to keep a watch on.

Nifty continues uptrend

Nifty continues its uptrend. The first obvious level of resistance is 5305-5310 area where it stopped on 6 Jan 2010.

Its been a surprising reversal...we were 4670 on 8 Feb 2010. But then that's what the markets are - surprising. That's why we should always follow the market and not try to force it to go the way we want. because that's not going to happen!

S&P affirms ratings on India; outlook revised to stable

The entire article can be read here:
http://in.reuters.com/article/domesticNews/idINWLB034420100318

Nifty update

Nifty short term trend remains UP...traders can wait for pullbacks to enter...I would wait for a close below 4950 to go short again....

Till then stay long or be wrong!
M52FDAZTX8V5

Bull Markets Roll, Bear Markets Spike

There is an old saying that “bull markets roll, but bear markets spike.”

In a bull market, most investors are long-only. They are happy, The bull market thus “rolls” along, as more bullish investment capital flows into the market and positions are added to.

In a bear market the case is different. Very few people are ready to go short. So many people are angry. The result is a spiky profile where declines are interrupted by surprisingly vicious rallies of short duration.

These mini-rallies are made more vicious by the forced activity of “short covering,” in which bearish traders get “squeezed” out of their positions by the fighting spirit of the bulls.

Nifty update

The trend in Nifty is now changed to UP...yesterday it closed above 4950...which has made the trend up

Traders can look for a dip to enter and be long as long as Nifty remains above 4950

Attention Bears: UK's budget deficit same as Greece

At slightly more than 12 per cent of gross domestic product Britain's budget deficit is the same as Greece's.
Short sellers that have profited from the Euro are now taking huge bets on the pound, which is already down 8 percent this year against the dollar.

The entire story can be read here:

http://www.theglobeandmail.com/report-on-business/economy/short-sellers-take-aim-at-pound/article1486002/

Euro and hedge funds

Hedge funds are taking big bets for the crash of the Euro. We might be in the middle of something big. Like how the pound crashed in 1992 courtesy George Soros

The entire article can be read here:

http://online.wsj.com/article/SB10001424052748703795004575087741848074392.html?mod=rss_whats_news_us_business&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Fxml%2Frss%2F3_7014+%28WSJ.com%3A+US+Business%29&utm_content=Google+International

What US recovery?

Banking: lending is down which is bad. The FDIC is almost bankrupt. Who will bailout the FDIC?

Consumer confidence: The Conference Board numbers for February is 46 (around 100 is a good number). The present situation subindex fell to 19.4, the lowest level since February 1983.

Employment umbers: still very bad...jobless claims is almost 500,000

housing industry: mortgage applications for home purchases have just fallen to a 13-year low. New home sales in the U.S. fell to the lowest level on record in January. Freddie is still losing tonnes of money all backed by the government



The entire article can be read here:
http://seekingalpha.com/article/190665-recent-stats-indicate-u-s-economic-recovery-was-an-illusion?source=email

Managed futures gaining popularity

Managed futures as part of overall asset allocation is gaining popularity

A very good article can be read here:


http://www.nytimes.com/2010/02/27/your-money/27money.html

4950 resistance still holding on Nifty

Nifty is vey volatile these days...gap up one day followed by gap down the next day...VIX which is an indicator of fear is currently above 31...

4950 is still holding as resistance...my overall view is still bearish...a close for 2 consecutive days above 4950 would change my view to bullish

The next few days could be extremely volatile

US commercial loan crisis - time bomb waiting to explode

For all you bears waiting to get into action:

Half of the roughly $1.4-trillion (U.S.) worth of commercial loans coming due over the next four years are already "under water" and could trigger bank losses reaching as much as $300-billion per year, according to a Congressional oversight panel report released in February.

"A significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American," the 189-page report concluded.

"In the worst case scenario, hundreds more community and mid-sized banks could face insolvency ... Their widespread failure could disrupt local communities, undermine the economic recovery, and extend an already painful recession."

America’s 8,100 banks hold about $1.5 trillion in commercial real estate (CRE) mortgages, all but $1 trillion of which must be refinanced in the next four years.

About 3,000 small banks will be disproportionately hard hit by the failed refinancing. These banks have what the Government calls “CRE concentration”, with CRE loans equal to at least 300 per cent of total capital.

The entire article can be found here:
http://www.globeinvestor.com/servlet/story/GAM.20100212.IBUSECONOMY12ART1937/GIStory/

http://business.timesonline.co.uk/tol/business/economics/article7023861.ece

Nifty breaks out of range

The Nifty has broken out of the trading range from 4750-4830 towards the upside

For the short term the trend is up though the overall bias is still downwards. If the Nifty sustains above 4950 for a few days then the overall trend might change to up again.

For the time being decide your horizon and trade accordingly. Volatility is very high which is a feature of bear markets. The markets will guide us in the next few days as to the direction it is going to take.

Are the FIIs making a mass exit?

FIIs have pulled out USD 2.7bn in the last 18 trading days from India
To put things in perspective they injected USD 17bn in 2009

So its quite a substantial part they have removed. Lets see if this trend continues over the next few trading days

Dubai in the spotlight again

Dubai debt concerns re-emerged Friday as the cost of protection against a default by the Persian Gulf emirate climbed to the highest level since November, according to data provider Markit.

The price of credit default swaps on Dubai government debt jumped to 630 basis points on Friday, up from 592 on Thursday, Markit data show. These CDS prices were last above the 630-point mark on Nov. 27, when they traded at 634 basis points.

The entire story can be found here:
http://www.marketwatch.com/story/dubai-debt-concern-grows-2010-02-12

Next week should be another interesting week

Who is going to bailout USA?

The European Central Bank is not permitted to provide direct assistance. Greece needs help from individual countries. Its quite possible that France and Germany will let Greece default. Those two countries, however, are the number one and two top foreign holders of Greek debt with $75 and $43 billion respectively, so this seems unlikely.

The situation is very complicated. If bigger countries bailout these smaller countries, who will bail them out when they need help as by helping the smaller countries they are weakening their own health? 7 states in USA are bankrupt, the FDIC is bankrupt and the UK has a similar sorry state.

Who is going to bailout USA?

In the short term, If Germany decides not to guarantee Greek debt, markets will probably crash. Positive news might cause a relief rally.

So expect volatility in the days ahead.

The great gold rush

If the downmove in the Dow materialises, gold and all asset classes will fall in tandem. In 2008, when the Dow and all global indices was crashing, gold fell from $936 on October 8th to $681. So be careful before piling into gold

Currently most indices are testing their 200 DMA. So the tussle around the Nifty 4750-4830 level continues. This should get resolved in the next few days. Let the market advise us where it is headed to in the short term.

The Big Fight at 4800

Bulls and bears are having an awesome fight at Nifty 4800 levels. The bears are not letting the Nifty cross 4800. Its an interesting and crucial battle.

Volatility has increased as demonstrated by the VIX. This is a critical part as the mood is now changing from bullish to bearish. The next few days are very interesting. Enjoy!

PIGS crisis just the biggening?

The sovereign default fears in the European countries is very small compared to what the real scenario is...7 states in the US are bankrupt...there is a limit to how much money can be printed by governments...ultimately there is going to be tightening of policies to bridge the deficit...which leads to deflation, crash of equity, commodities...and a rally in the Dollar Index

Back home the Nifty has broken 4700 on an intraday basis..let us see if it closes below 4700...

Analysis on China

The Shanghai Index closed on Feb 4th 2010 at 2995.
On 4 August 2009 it hit an intraday high of 3478
In October 2008 it was roughly 6100 levels

So the Shanghai Index appears to have had a top on 4 August 2009 and is currently heading downwards.

The BIG move for China happened in the months of Feb-July 2009...after that it has been just in distribution phase.

Looks like the bears have taken control firmly in China which appears to be a bubble like situation. The next few months should be very interesting

4800 needs to be broken to see 4500

A Nifty close below 4800 can make us see 4500....Market is looking weak and exhausted...All indicators are looking bearish...even on higher timeframes like weekly and monthly charts...generally weekly and monthly charts give fewer and better signals...although there is a slight lag...Everything in life has a tradeoff.

I think its a matter of time before we see 4500 and lower levels...this is a market to short on rallies rather than buy on dips...but then its all a game of probabilities...keep your stops and enjoy the ride if it materialises

Nifty not being able to break 4950

Nifty is not being able to break 4950 which acted as a key support earlier.

If Nifty goes above 5000 there will some serious short covering and we can see 5200-5300 very soon

If Nifty closes below 4800 there is huge downside possible.

Between 4800 and 4950 it is rangebound and can be dull for a few days. But then the best moves come after dull periods like this.

Trend Trading

Trend Trading is the science of measuring the direction of today’s trend, taking a position on that basis and then allowing Law of Inertia and probability favor the continuation of that trend for an unknown period of time into the future.

We do not have to worry whether the Nifty is going to go to 1000 or 10,000. It is similar to steering a ship in the direction of the prevailing wind. When the economic weather changes, we will change our course with it. We will not under any circumstances try to forecast the future time or place at which the wind will change.

Trend traders have a systematic plan. That plan includes knowing that they will not win every day, week, or month.

One question I always get from my subscribers is when they see 200 points open profits turn into say 50 points and me exit a trade. For example I go long in Nifty at 5000...Nifty goes to 5200...but my system generates an exit at 5050.

Now if I exit at 200 profit I will never see the big ones...which are the ones that actually make the year.

So trend trading is a game of patience and discipline.

Nifty still bearish - 4950 is key resistance

Nifty gapped up today near the 4950 levels and ended the day significantly in the red. 4950 is proving to be a key resistance. A close below 4800 will further reinforce the fact that the bears have taken control with 4500 as the next target.

Sovereign Defaults and CDS

Keep a close eye on the CDS rates of Greece, Dubai and Portugal

Credit default swaps (CDS) are insurance policies that pay investors in case there is a default.

Sovereign default like the fear that arose in Dubai could be the next trigger in the bear market that is likely in 2010.

China is a leading indicator of a market crash

China fell 73% from a peak in October 2007 to a low in October 2008. After that it has retraced 40% approximately.

China shares topped before US and India in October 2007, bottomed before US and India in October 2008. So there is a very high probaility that China will lead the next leg down which seems to be underway.

So all eyes on Shanghai!

Nifty target of 3800 if downmove materialises

If this downmove is to materialise the next Nifty support is at 4800, then 4500 with a target of 3800

MACD Divergence on Nifty

Divergence in daily MACD and Nifty Futures is a strong early warning sign of a reversal in trend

Nifty close below 4950 very bearish

Nifty has broken below the trendline which contained the upmove from March 2009 lows of 2800 levels.

Trendlines do work. Notice how a break above the channel in end March signalled the end of the downmove and the start of an upmove as indicated in the chart.

Nifty closing below 4950 is very bearish.

Trading Idea: Short the Nifty if it goes below 4950 and keep 4950 as the initial SL.SL can be trailed aftersome time depending on how the market moves.

Possible start of correction - anniversary of Jan 2008 crash

Nifty could be starting the correction of the rally which started from March 2009. A close below 4950 would further reinforce this bearish outlook. Please exit all longs in stocks and mutual funds as 3500-3800 is the target of this downmove.

A disclaimer: Nifty could rebound sharply and once again go upwards above the 5000 mark as has happened 3-4 times in the past. As an investor would you like to risk last 9 months gains for some limited potential upside? The choice is yours.

For traders keep your stops and enjoy the downswing if it deepens.

A big coincidence is we are now celebrating the 2nd anniversary of the Jan 2008 crash. What an apt time for the bears to take grip again!

Nifty continues uptrend

Nifty continues its uptrend. Until the market is bearish it is bullish. So we have to respect the trend. Although this might be the final leg of the up move.

All investors are bullish now. This is the clearest sign of a major correction on the horizon.

A close below 5200 for a few days could signal the downmove. Till then stay long. Or be wrong!

Decade of negative returns in US

While the media is now proclaiming 2010 to be a bull run for the S&P, it is wothwhile to consider how buy-and-hold worked out for investors in US:

The Dow ended 9% in the red, the S&P 500 - 24%, and the NASDAQ Composite - 44%.

If you were to learn just one thing from this blog remember these golden word:

" When everybody arond you is bullish exit all longs and prepare to go short.
When everybody is bearish, exit all shorts and build up long positions"

Investors in India are very bullish and I think the long term bull picture is intact in India for the next 5-6 years. But when things turn down it won't take long to erase the gains made over the last many years. If one follows the above golden rule one can save oneself from a lot of financial carnage.