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.