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.